Fund managers in South Korea, Japan, and Australia raised more in 2020, as COVID-19 accelerated the capital consolidation trend across the wider region
Fund managers in South Korea, Japan, and Australia raised more in 2020, as COVID-19 accelerated the capital consolidation trend across the wider region
2020 was not a great year for Asia-Pacific fundraising as a whole. Private equity & venture capital funds were down a staggering 40% on 2019 in terms of capital raised, as COVID-19 forced LPs to pull back on commitments. Preqin data shows that GPs in the region raised a combined $97bn in 2020, down from $161bn in 2019. Mainland China and Hong Kong were particularly hard hit; capital secured by fund managers based in these two locations fell by 51% and 64% respectively.
But not every country had a lackluster year. South Korea, Japan, and Australia all bucked the global trend to report an increase in fund commitments. “In every single case, the headline number was lifted by one or two billion-dollar funds,” says Ee Fai Kam, Head of Asia Research & Data Operations at Preqin. “Korea had the $6.5bn MBK Partners fund that contributed to a third of the year’s total, Japan had two buyout funds that exceeded $1bn each, while Australia had a $1.7bn Pacific Equity Partners fund.”
The MBK Partners V fund, which closed in May 2020 at its hard cap of $6.5bn after just six months on the road, helped South Korea muscle in ahead of Hong Kong to become the second-largest destination for fund commitments in the region – for the first time since 2016. South Korea-based fund managers raised a combined $19bn in 2020, up 42% on 2019. Investing in companies based in China, Japan, and South Korea, MBK Partners V is the third-largest investment vehicle in Asia. Having achieved an annualized IRR of 18% across its four previous funds, it should come as no surprise that MBK Partners attracted commitments from LPs looking for security amid the pandemic. Many North American and Korean pension funds were quick to back MBK’s fifth fund.
COVID-19 has also accelerated the capital consolidation trend across the region. Japan-based fund managers raised a combined $7.6bn in 2020, up 12.5% on 2019, but two funds alone accounted for a third of that total: Polaris Private Equity Fund V, which closed at JPY 150bn ($1.4bn) in November; and INTEGRAL IV, which closed at JPY 123.8bn ($1.2bn) in December, surpassing its JPY 100bn target. Meanwhile, Australia-based fund managers raised a combined $4.2bn last year, more than double the $1.8bn raised in 2019. This was largely down to Pacific Equity Partners Fund VI, which invests in buyout opportunities in Australia and New Zealand, closing at its target of AUD 2.5bn in July.
According to Preqin data, 54% or $12.9bn of all capital raised by the region’s private equity & venture capital funds so far this year came from eight funds that closed at $1bn or higher. Asia-Pacific’s capital consolidation trend shows no signs of abating for the time being.