ASEAN remains a bright spot for private equity and venture capital despite 2023 fundraising drops -- Preqin reports

ASEAN-focused venture capital AUM hit record high of $27.3bn in March 2023

SINGAPORE, Dec. 8, 2023 /PRNewswire/ -- Preqin, the global leader in alternative assets data, tools, and insights, published its Preqin Territory Guide: Private Equity and Venture Capital in ASEAN 2023 report. The report finds that private equity and venture capital (VC) fundraising and deal activity in the Association of Southeast Asian Nations* (ASEAN) have so far fallen this year (as of data to October 2023), compared to 2022. However, Preqin insights suggest that bright spots for future growth remain as ASEAN VC assets under management (AUM) hit record highs in 2023.

The report details the current economic landscape in the ASEAN region, offering analysis of key drivers of growth as well as challenges. ASEAN was affected by macroeconomic headwinds in 2023, with higher for longer interest rates and inflation resulting in lower demand for their exports. Despite these challenges, growth domestic product (GDP) rates remain strong compared to Europe and North America, between 3.4% and 5.8% for ASEAN's key markets in 2023. Furthermore, ASEAN's young workforce, and growing middle class in Southeast Asia in particular, will continue to generate demand for innovative solutions, funded by the VC industry.

VC AUM reaches record highs in 2023, but deals slow down

ASEAN-focused VC AUM reached new heights in 2023. That said, a slowdown in deals activity shows the asset class has not been exempt from inflation and interest rate driven headwinds, impacting all alternative assets' deals activity in 2023.

ASEAN-focused VC AUM reached an average annualized growth rate of 31% between December 2019 to December 2022, peaking at a record high of $27.3bn in March 2023. In comparison, ASEAN-focused private equity AUM was at $23.8bn as of March 2023. VC dry powder also broke records in March 2023, hitting $7.4bn**. This record high occurred through ASEAN-focused VC dry powder growing by 25% from the end of December 2022 to March 2023. The report highlights that Southeast Asian countries' economic growth and demographics are driving investor interest in the ASEAN region.

While there are promising signs for further VC AUM growth in 2024, total deal transaction value in ASEAN-focused VC fell to $6.7bn*** for 2023, as per data up to October. This accounts for less than a quarter of 2021's $24.0bn – a current record. However, this high was when the adoption of digital services accelerated in ASEAN markets and technological innovation flourished, all while low interest rates and large amounts of capital available led to strong dealmaking conditions. In looking at what countries are driving this trend, Indonesia, and Singapore account for 86% of total deal value in the ASEAN this year, as per Preqin data to October. That said, Vietnam and Thailand have seen strong growth, with 2022 figures achieving nearly x3 and x6 that of 2018 deal values, respectively.

Private equity and VC fundraising in ASEAN has softer fall than broader Asia region

While ASEAN-focused private equity and VC fundraising remained steady in 2022 amid worsening macroeconomic conditions and a tough fundraising environment, it fell this year as 21 funds raised $2.7bn by the end of October. The aggregate capital raised was half of the $5.4bn raised across 32 funds in 2022. That said, the drop in capital raised was less drastic than broader Asian-focused fundraising for the same asset class combination, which reached $45.8bn in 2023 to October – 38% of 2022's total of $120.0bn.

Valerie Kor, lead author of the report, at Preqin says, "Southeast Asia is one of the bright spots within Asia in terms of economic growth. The region's young and tech-savvy populations generate demand for innovative solutions, spurring the VC industry. ASEAN-focused VC AUM has demonstrated consistent year-on year growth. Although deal activity has fallen in 2023, the presence of sizeable newly closed funds is likely to revive the start-up ecosystem in the region."

Additional key findings from the report:

• VC fund closes: Vertex Ventures SEA & India Fund V, the largest ASEAN-focused fund that closed in 2023 to October was $541mn in size – the fifth largest in the last ten years.

• VC deal value: 40% of ASEAN-focused venture capital deal value came from the IT sector.

• Private equity aggregate exit value: Aggregate exit value for ASEAN-focused private equity was $1.9bn in 2023 as of October, falling from $2.6bn, or 27%, compared to 2022. 

Notes to editors: 

*ASEAN includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam.

**Dry powder is one element of how Preqin calculates AUM figures – the other component being unrealized value of investment.

***This excludes add-ons (when a private equity- or VC-backed portfolio company acquires a smaller company, or the assets of a smaller company), mergers, grants, venture debt and secondary stock purchases.