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ASEAN Remains the Best Prospects for Private Equity and Venture Capital

This article has been translated and summarized by CORIM Indonesia as part of our highlights of services. We has not completely checked the accuracy and admits no responsibility for the content.

By antaranews.com

News | January 17, 2024

ASEAN Remains the Best Prospects for Private Equity and Venture Capital

Preqin's Preqin Territory Guide: Private Equity and Venture Capital in ASEAN 2023 report indicates a decline in fundraising and deal activity in ASEAN compared to 2022. However, the report suggests bright spots for future growth as ASEAN VC assets under management reached record highs in 2023.

The report analyzes the ASEAN region's economic landscape, highlighting growth drivers and challenges. Despite macroeconomic headwinds in 2023, GDP rates remain strong, ranging between 3.4% and 5.8% in key markets. The young workforce and growing middle class in Southeast Asia will continue to generate demand for innovative solutions funded by the VC industry.

VC AUM reaches record highs in 2023, but deals slow down

ASEAN-focused venture capital AUM (VC AUM) reached a record high of $27.3bn in March 2023, with an average annualized growth rate of 31% between December 2019 and December 2022. However, a slowdown in deals activity indicates that the asset class has not been immune to inflation and interest rate-driven headwinds, impacting all alternative assets' deals activity in 2023. The report highlights that Southeast Asian countries' economic growth and demographics are driving investor interest in the ASEAN region. The total deal transaction value in ASEAN-focused VC fell to $6.7bn*** for 2023, accounting for less than a quarter of 2021's $24.0bn. Indonesia and Singapore account for 86% of total deal value in the ASEAN this year, while Vietnam and Thailand have seen strong growth.

Private equity and VC fundraising in ASEAN has softer fall than broader Asia region

ASEAN-focused private equity and VC fundraising fell in 2023, with 21 funds raising $2.7bn by October, half of the $5.4bn raised across 32 funds in 2022. However, this drop was less drastic than broader Asian-focused fundraising, which reached $45.8bn in 2023 to October, 38% of 2022's total of $120.0bn. Southeast Asia's economic growth and tech-savvy populations drive demand for innovative solutions, and ASEAN-focused VC AUM has shown consistent growth.

Additional key findings from the report:

  • VC fund closes: Vertex Ventures SEA & India Fund V, the largest ASEAN-focused fund that closed in 2023 to October was $541mn in size – the fifth largest in the last ten years.
  • VC deal value: 40% of ASEAN-focused venture capital deal value came from the IT sector.
  • Private equity aggregate exit value: Aggregate exit value for ASEAN-focused private equity was $1.9bn in 2023 as of October, falling from $2.6bn, or 27%, compared to 2022.