While the Covid-19 pandemic has impeded Asean’s growth rate and created complications for policy-makers across the region, demand for capital to drive economic growth has lifted private equity and venture capital (PEVC) assets, and a robust return to growth momentum for the region is forecast.
The region, according to data provider Preqin’s Alternative Assets in Asia-Pacific (Southeast Asia) report, is attracting large amounts of PEVC investments, and these alternative assets are on track to set several new records in 2021. The Asean-focused PEVC industry reached a new high of US$37 billion as of December 2020, more than doubling in five years (from US$17billion in 2015).
This upward trend can be traced to the amount of capital secured by Asean-focused PEVC funds, which has picked up swiftly since 2017 and reached US$9.6 billion in 2019. As of April 2021, these same Asean-focused funds had secured a total of US$33 billion in commitments since 2010.
Highlighting the strong performance of the region, the median net internal rate of return for 2009-2018 fund vintages with a focus on Asean, stood at a robust 22%, compared with 14% for the rest of Asia.
“Southeast Asia’s insatiable need for capital to fuel economic growth is leading to private equity and venture capital assets being bolstered,” says Ee Fai Kam, Preqin’s head of research and data operations. “Going forward, we expect the diversity of venture capital deal types and the quality of companies coming out of the region becoming much more interesting for investors.”
With its young population, growing middle class and improvements in internet connectivity, Southeast Asia has developed into a technology hub, boosting sectors such as e-commerce and digital payments.
Against this background, Asean-based venture capital industry assets under management reached a record-breaking US$16 billion, or 2.6 times the total in 2015. On the deals front, the total value of venture capital transactions in Southeast Asia expanded to more than US$10 billion in H1 2021, already surpassing 2020’s level of US$8.22 billion.
While global attention for listings of Southeast Asia-based startups has been sporadic, the region’s tech companies, valued at over US$10 billion, are now seeking exit options.
Kam adds: “For the venture capital industry, the region’s most valuable unicorns are exploring concrete plans to go public, either through the traditional IPO [initial public offering] route or by merging with SPACs [special purpose acquisition companies].”