In only a couple of years, this sector's popularity will take it to the $1.0 trillion mark, a new report said.

The global venture capital industry will reach $1.0 trillion in assets under management in the near future, rising from $856 billion at the end of 2018, a doubling over five years, a study finds.

The report, Global Venture Capital Perspectives, comes from alternative investment research firm Preqin and Vertex, which is a network of venture capital funds.

While the US remains the largest single market for venture capital, the fastest growth has been in Asia, particularly in China, which is now home to three of the 10 largest venture capital funds ever raised. VC comprises 14 per cent of the $6.06 trillion global private capital industry, the report said.

When Asia-focused venture capital fundraising surged from 2013 to 2017, it boasted the lion’s share of the global venture capital market. Since then, North America has regained its spot as the largest fundraising market, securing just over half ($49 billion) of the total market share in 2018.

The report said that established US managers have raised large funds for global opportunities. One such manager, New York-based Tiger Global Management closed Tiger Global Private Investment Partners XI on $3.8 billion to target the Indian and Chinese internet, media and telecoms sectors.

The sector has benefited from wealth managers’ hunger for higher returns in a low-interest rate environment that has hit yields on conventional listed equities and other mainstream assets. Venture capital is illiquid – holding periods can be counted in decades – but there’s a premium to be earned. Activity remains focused on sectors like artificial intelligence and machine learning, healthcare technology and the internet of things. On the downside, the report said that high valuations are “making it difficult to secure attractive deal opportunities, and for some start-ups the path to a successful exit remains long and difficult”.

The report noted that North America was home to more venture capital deals (5,781) over 2018 than any other ecosystem. And yet, the 4,727 deals completed in Greater China reached a higher aggregate value at $107 billion versus $105 billion in the US.

Global exit value rose “dramatically” in 2018, reaching a record $170 billion, the report said, in tandem with a decrease in the total number of exits between 2017 and 2018. The US saw the most exits of any ecosystem, and at the highest total value ($88 billion). At $30 billion higher than the 2017 total, this was a record level for the region.

The report added that the outlook for the VC sector globally is “bright”.