AUM for Asean-focused PE, venture capital industry at US$37b, more than doubling in five years

SOUTH-EAST Asia's booming startup environment and its growing need for capital have bolstered its private equity (PE) and venture capital (VC) assets in recent years, with many VC funds setting up headquarters in the region to be in the thick of the action.

A Preqin report on alternative assets in South-east Asia, launched on Wednesday, estimated that as at December 2020, assets under management (AUM) for the Asean-focused private equity and venture capital industry stood at US$37 billion, more than doubling in five years. (see Amendment note)

In particular, venture capital and growth funds hold 81 per cent of total AUM across all private equity fund types, a development fuelled by an attractive startup environment, growing technology adoption and digital-first business models.

The region's domestic venture capital industry, which commanded US$2.7 billion in AUM in 2010, saw a sixfold increase by 2020 to over US$16 billion in assets managed.

The six largest Asean-focused VC funds in market as at July 2021 are headquartered in Singapore, with their target sizes ranging from US$150-400 million, according to research from Preqin, a data provider focused on the alternative assets industry. The firms behind these funds include Jungle Ventures, Arbor Ventures, Altara Ventures, Openspace Ventures, Golden Gate Ventures and Monk's Hill Ventures.

Aggregate PEVC capital raised by Asean-focused funds over the last decade (2010-Q1 2021) stood at US$13.5 billion for Singapore, the highest among its Asean and global counterparts. Malaysia, which comes in second, saw US$5 billion raised within its borders. Preqin also reported Singapore housing the largest number of fund managers, at 313, over the decade.

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While the Covid-19 pandemic has put a damper on fundraising activity last year, capital-raising momentum is expected to pick up this year as the path out of the pandemic becomes clearer - in fact, fundraising activity as of July 2021 (US$2.1 billion) has already surpassed last year's sluggish turnout (US$1.4 billion).

Exit momentum is also picking up. To be sure, the current roster of South-east Asian venture-backed companies striking it rich with a hotly anticipated initial public offering (IPO) is short. One of the most notable flotations was Singapore-headquartered Internet company SEA Limited's IPO on the Nasdaq in 2017, which raised around US$884 million, making it the region's most valuable startup then, but global attention for listings of regional startups has been limited ever since.

That said, the region's most valuable unicorns are now looking at plans to go public, either via the traditional IPO route or by merging with SPACs, or special purpose acquisition companies.

Two of Indonesia's largest startups, e-commerce giant Tokopedia and super app platform Gojek, have merged to form GoTo, in the run-up to a dual listing in New York and Jakarta later this year, targeting a post-money value of about US$40 billion. Singapore-headquartered super app Grab is also set to list in New York in a record US$40 billion SPAC deal.

"In a global environment awash with unprecedented levels of liquidity, more options are opening for exit opportunities in the region... Whatever the route to public markets, the pipeline for exits has never been stronger," Preqin said in its report.

Buyout deals, on the other hand, have lagged after hitting a high of almost US$14 billion in 2017, according to Preqin, with aggregate deal value falling to an average of US$3.5 billion over the past three years.

"Unlike venture capital, the large ticket sizes needed to participate in buyout deals and the typically more publicly sensitive nature of targeted sectors, such as infrastructure, energy, and healthcare, create a very complex deal-making ecosystem for only the largest of global private equity funds," the report said.

Amendment note: Preqin has clarified that as at December 2020, AUM for the industry stood at US$37 billion, not US$39 billion.