The findings are of value because private equity is a major asset class holding for wealth management clients, whether at private banks, external asset managers or family offices.

General partners running private equity firms in the Asia-Pacific region are most concerned about high valuations, intensifying competition and the disruption caused by COVID-19, according to a study by the consultancy, Bain & Co. 

Deal values rose across Asia last year as investors piled back into the fray after the early-2020 hit caused by the pandemic. Deal value reached a record high of $185 billion, rising by 19 per cent from 2019 and 23 per cent over the previous five-year average, the firm said. Bain spoke to 162 senior market practitioners. Some 63 per cent of general partners said that higher multiples were one of their top concerns. Some 40 per cent of GPs said valuations rose last year.

“It’s been a rollercoaster year for private equity in Asia,” Kiki Yang, co-head of Bain & Company’s APAC Private Equity practice, said. “But while deal-making ended the year on a high, COVID-19 has not gone away, and building portfolio resilience will be a crucial skill for leading investors.”

To put the region into context, Asia accounts for 28 per cent of the global PE market, the report said. 

Private equity is a major asset class holding for wealth management clients, whether at private banks, external asset managers or family offices. PE typically offers superior yields to compensate for lower liquidity – a big draw at a time of globally low interest rates.

China’s total deal value rose to $97 billion, a rise of 42 per cent from 2019 and 22 per cent higher than the previous five-year average. Meanwhile, India continued to increase its share of deal activity in the region. Deal value rose to $38 billion, up by 64 per cent over the prior five-year period. The growth came partly from an extraordinary series of 10 private equity investments totalling almost $10 billion in technology multinational Jio Platforms, and seven investments in Reliance Retail.

While deal value grew in Japan and Australia/New Zealand from the previous five-year averages, South Korea’s deal activity was on par with previous years. Travel restrictions hit deal activity significantly in Southeast Asia, where deal value fell by 16 per cent over the previous five-year average, the report said. 

Following a “breathtaking” fall to a 10-year low in 2019, the number of exits was flat last year, it said. Exit deal value totalled $70 billion, down by 24 per cent year-on-year and 40 per cent from the previous five-year average, as PE managers awaited better times fo selling portfolio companies. Of the GPs Bain surveyed, more than 70 per cent said the exit environment was more challenging than in 2019, pointing to COVID-19 as the principal cause for a weak exit environment.

However, a bright spot was the route of initial public offerings, the report said. IPOs dominated the exit market, making up more than 60 per cent of exits by value, almost double the previous five-year average. China accounted for 86 per cent of the region’s IPOs and the majority were healthcare and technology companies.

The value of the companies held in PE portfolios, or unrealised value, continued to climb, reaching $1.04 trillion, rising by 33 per cent year-on-year. 

Fundraising slowed in 2020, overshadowed by a poor exit environment. Funds focused on Asia-Pacific raised $90 billion, down by 32 per cent year-on-year, 53 per cent from the prior five-year average, and 64 per cent from the peak year of 2017.