• 83% of Asian private equity professionals believe China will see growth in deal activity over the next 12-24 months, followed by South East Asia (43%). Only 13% expect to see growth in Japan or Australia
  • 68% said that successfully exiting portfolio companies in the current environment represented a significant challenge for Asian GPs
  • Other major challenges include increased competition from buyers including sovereign wealth funds, pension funds and large corporates (58%) and build-up of dry powder inflating valuations (63%)
  • 61% globally believe the greater demand for transparency is creating a divide between managers and investors
  • 74% predict an increase in the number of co-investment partnerships and separate accounts offered by Asian GPs to LPs by 2019

Hong Kong, 13th October 2017---With private equity assets under management hitting all-time highs in Asia Pacific as well as globally, private equity managers are battling increased competition from outside the industry and growing demands from investors as they look to successfully deploy their funds, according to a new global study from Intertrust, a leading global provider of high-value fund, trust and corporate services.

The vast majority of Asian private equity professionals (83% of those polled) believe that China will experience growth in deal activity over the next 12-24 months, and 43% believe South East Asia will also see an increase, however, only 13% expect growth in deals in the more developed markets of Japan and Australia.

To achieve this growth, 74% of respondents to the study in Asia Pacific expect to see an increase in the number of co-investment partnerships and separate accounts offered by Asian GPs to LPs by 2019.

However, the industry does face challenges. Globally, there is a feeling that increasingly complex reporting requirements and private equity managers' ability to respond to them is challenging their relationship with investors, with 61% saying that a greater demand for transparency is creating a divide. Investors are demanding to know more about fee structures, expense allocation and also about the underlying assets in portfolios.

"Fund raising activity in Asia Pacific remains buoyant, and despite some political uncertainty there is definite optimism in terms of deal potential in the region. However, investors are increasingly sophisticated and more cautious nowadays, and demanding far higher levels of governance, transparency and accountability in return for their commitments," said James Donnan, Head of Fund Services at Intertrust Hong Kong. "The industry needs to listen and address these needs within their investment process.

In Asia Pacific specifically, more than two thirds believe that a significant challenge faced by private equity managers in the region will be exiting an investment once made. Just less than two thirds expect that the large amount of funds raised recently will push up valuations making it harder to make good investments. And more than half of respondents in Asia see competition from sovereign wealth funds and pension funds as a big challenge for private equity funds.

Globally almost 80% of respondents expect GPs to increase their focus on managing ESG considerations in their portfolio companies. Just more than half (55%) of respondents in Intertrust's study believe that private equity firms will adopt The Principles for Responsible Investment but 51% see cost of doing this as a big obstacle, while 39% cite the power to evaluate ESG as the biggest constraint.

There is also an evolution in the industry in terms of fund structure. More than a third of respondents (38%) expect to see short-dated funds with term limits between three and five years grow in popularity while 28% see permanent or 'evergreen' funds becoming attractive. About the same number (26%) foresee growth long-life funds, with an investment term of 15 – 20 years, in particular because of their ability to invest in portfolio companies for longer periods to improve returns. Seventy six percent said they thought lower management fees would encourage long-life funds to grow in popularity but 56% think they need to demonstrate some success before they take off further.

The research was carried out in Q3 2017 with responses from 142 responses private equity professionals in the UK, Continental Europe, North America, Africa, Asia and The Middle East.

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