Biggest rise in PE demand coming from Asia and family offices

With global investor interest in private equity steadily rising, a new survey shows that the biggest jump in demand last year came from family offices and, on a regional basis, from Asia.

And yet, perhaps counterintuitively, the main concern for Asia-based PE general partners for 2017 – cited by 56% of managers – was fundraising, found research house Preqin in a global poll* in November.

That compares to the key issue cited in both Europe and North America: high company valuations – cited by 43% and 49%, respectively, of respondents in those two regions (see figure below). 

Meanwhile, competition for investor capital is rising, noted the Preqin report: 73% of private equity managers reported an increase in competition over the past 12 months.

Fortunately for GPs, demand is also expanding for PE assets. Around half (48%) of investors surveyed plan to increase their allocations over the longer term.

Asia appears particularly fertile ground. More than half (53%) of GPs reported an increase in appetite from investors based in the region, and only 4% pointed to a drop. That is significantly higher than the figures for North America and Europe, where 39% and 38% of managers reported a rise in appetite (see figure below).

One might surmise that demand for PE among Asian investors is climbing from a lower base, but this remains a significant finding.

Similarly, demand growth for private equity from family offices was well above that among any other investor type. Around six in 10 (62%) of managers reported a rise in appetite from this segment, with wealth managers (37%) and private-sector pension funds (37%) next on the list (see figure below).

Indeed, family offices and external asset managers are increasingly looking to go directly into PE via co-investment. For instance, Singapore-based HP Wealth Management, which manages money for several families, aims to conduct its first such transaction soon.

Mid-market deal demand

When it came to deploying capital, 42% of GPs globally said they faced more overall competition for assets than the year before – as against 48% that saw no change.

Mid-market buyout transactions are attracting the most interest: 51% of PE firms see more competition for such deals this year. Some 44% said the same for large buyouts, and just 35% for small buyouts.

Accordingly, mid-sized buyout funds have seen strong fundraising of late, noted Preqin. Last year saw 48 vehicles raise a combined $41 billion, a post-2008 financial crisis record.

*The research house surveyed 400 PE firms globally, 14% of which were headquartered in Asia and 2% in Australasia. Most were based in either Europe (39%) or the US (38%).