Appetite for venture capital is rising and Asia-based investors are the most enthusiastic, a study shows.

Asia-based investors have shown the largest increase in interest in venture capital as an asset class, compared with investors from all other geographical regions, a survey finds.

Preqin, the research firm tracking alternative asset classes such as private equity, polled 143 VC fund managers and found that institutional investor appetite for exposure to venture capital has risen across all regions, with Asia as the standout region. Some 62 per cent of firms polled stated that they were seeing more appetite for the asset class than was the case a year ago. Only 9 per cent of the VC firms polled said appetite from Asia-based investors has declined in the past 12 months, the lowest proportion seen in any region.

In other regions the growth is more equivocal, although the general trend is towards greater appetite for the asset class. Some 18 per cent of managers surveyed said investor appetite for venture capital has declined in North America, the largest market for the asset class, although 38 per cent of firms said appetite had increased there. At the same time, 23 per cent and 21 per cent of managers reported increased appetite from investors in the emerging markets of sub-Saharan Africa and Latin America respectively, compared with the 13 per cent of firms which have seen less appetite from these regions.

While Asian appetite for VC as an asset class may be rising, the Asian VC market has had a difficult period in recent months, some reports say, linked to the volatility in Chinese equities late in 2015 and into 2016. Venture capital investments in China’s technology start-ups fell 28 per cent to $1.8 billion in the first quarter of 2016 from $2.5 billion a year earlier, according to Hong Kong-based AVCJ Research. In India, venture capital investors in the first quarter of 2015 pumped $891 million into tech start-ups. That number fell 17 per cent to $736 million for the first quarter of this year. And in South Korea, venture capital investments fell 37 per cent to $45.8 million in the first quarter from $72.2 million a year earlier. (Source: Wall Street Journal, 12 May 2016.)

Among other findings, the Preqin report said 23 per cent of VC managers have a fund on the road and 43 per cent of the managers expect to bring a new fund to market over the next 12 months.

Another sign of Asia's role in the VC market was underlined when Preqin reported in July this year that the second quarter of 2016 saw $19 billion of transactions completed, up from $17 billion in the first quarter and $600 million above the previous record level of $18.5 billion in Q3 2015. The amount of venture capital invested in Asia was greater than the aggregate value of deals in North America ($17.5 billion). Venture capital performance in Asia showed that median net internal rates of return (IRRs) for 2011-2013 vintage funds outperformed North America- and Europe-focused funds. Asia-focused venture capital funds of vintage 2010-2012 have median net IRRs above 15 per cent. (IRRs capture the complex timings of deals.)