Today, limited partners are more confident of the India and Asia-Pacific growth story compared with three years ago as they see the risk-reward balance improving, according to Coller Capital’s latest Global Private Equity Barometer.
The report states that among the Asia-Pacific investment basket, India’s close competitor, China has lost the sheen to attract investors. One-third of the LPs see the risk-reward balance in the country as deteriorating.
The confidence towards India and the Asia-Pacific region is also reflected by the fact that at least 28 per cent of LPs have invested multiple times in GPs’ debut funds in this region and 5 per cent have invested at least once. The new GPs have also retained that confidence by showing robust returns where 37 per cent of the fund managers have outperformed the expectations and 54 per cent have equalled the performance of seasoned funds.
GPs are doing more than enough to pique the interest of LPs through early bird discount offerings, co-investment opportunities and an emphasis on transparency. At least 86 per cent of the LPs view that GPs are moving in the right direction when it comes to transparent dealings in businesses.
LPs focused on the North American and Asia-Pacific region are satisfied with the fee charged by the fund managers unlike the ones in the European region who think fee levels as too high. According to VCCEdge, the research platform of VCCircle, approximately $16 billion of the PE and VC money has been invested in India in the last one year which largely includes secondary deals. The good news for Indian PE industry is that majority of the LPs plan to buy private equity assets in the secondaries market in the next two years. “Asia-Pacific LPs will be the most active of all, with 59 per cent saying they expect to buy assets and 50 per cent expecting to sell,” Coller Capital’s report stated.
PE firms have also approached LPs with fund restructuring proposals since the global financial crisis. At least 79 per cent of the LPs have participated in one or more fund restructuring activity.
More than half of the LPs view private debt fund as an emerging asset class for better returns. India has also witnessed a high level of venture debt interest in the last two years with funds like Trifecta Capital entering the space.