Challenges are on
the rise for Asian Private Equity investors. According to Bain and Company, the
global management and consulting firm, the funds saw a steep decrease last
year. The worsening trade relation between the US- China, increasing competition
among the large and small funds and the increasing interest rates are heating
up the situation further.
equity investors are on vigil regarding the new Chinese economy which they call
the speculative bubble. According to Bain, the private equity has had a strong
growth in the Asia-pacific over the last decade. They are said to have $883
billion under management which accounts for nearly 26% of the global market.
Though the deals had hit a record breaking value of $165 billion in 2018,
however the total fundraising dropped by more than 50% to come down to $75
Bain’s co-head of
Asia pacific private equity, Kiki Yang said that the private equity has had an
ever increasing growth and the year 2018 reinforced this trend by creating
record breaking deals. As per reports, the larger companies collected much of
the successful exits while the smaller companies were finding it hard to find
buyers. Bain said that the exits which involved companies sold under $100
million decreased to 58% last year while those above $100 million rose by 26%.
Yang said that the exit market will be only getting tougher keeping in view the
risk of global recession and other economic challenges.
The volume of
private equity and venture capital flow into the Chinese market is huge and
this has saturated the market, which are making investors to look for greater
investments. Reports have highlighted the risks posed by the Chinese internet
and technology sector, which they call as the new economy. It is also said that
the use of traditional metrics like earnings and cash flow to evaluate this
economy is difficult. A greater two-third of the Chinese private equity
investors see a high risk of the speculative bubble which they feel would burst
in the years to come.