Asia PE trails regional public equities in 2012 despite bullish Korea
15 August 2013
News, Asia, China, Korea
By Asia Asset Management
The Asian private equity and venture capital markets underperformed regional equity markets in 2012, according to Cambridge Associates, despite South Korea bucking the trend with some remarkable returns.
The Asia-dominated Cambridge Associates LLC Emerging Markets Private Equity and Venture Capital Index gained 3.5% and 10.0% for the quarter and year, respectively, underperforming its public market counterpart, the MSCI Emerging Markets index, which rose 5.6% and 18.6% over the same periods, the firm announced on August 14.
“Nevertheless, it did outperform its public counterpart for the three- and five-year marks," noted Miriam Schmitter, managing director at Cambridge Associates.
Returns were positive for all of the significantly-sized vintages. Of the four such vintages, the largest, 2007, rose 3.8% for the quarter and 12.6% for the year. The annual return tied that of funds launched in 2006, the second largest vintage, for best performance of the group. Funds launched in 2007 represent 36% of the value of the benchmark, while the 2006 funds represented 17.4%. The 2008 vintage, the smallest of the four, had the lowest quarterly and annual performance, returning 2.6% and 9.8%, respectively.
There were five meaningfully-sized sectors in the index: consumer, financial services, healthcare, information technology, and manufacturing. Two sectors that were included in the third quarter, energy and media, no longer met the criterion for being meaningfully sized.
Returns for the quarter ranged from a high of 11.7% for manufacturing companies, which was driven by portfolio company write-ups, to a low of -4.1% for IT. IT also had the lowest annual return, -1.6%. This was the first time in three years that IT companies dragged down the results of the largest sectors in the index. Financial services companies generated a 22.0% return for 2012, the benchmark's highest.
Among the four meaningfully-sized geographic regions in the index, the largest continued to be China, which alone represented 35% of the benchmark's value. Portfolio companies based there generated a 3.1% return for the fourth quarter and a 5.5% return for the year. Companies based in India, the next largest sector, earned 1.1% and 15.1% for the quarter and year, respectively.
By far the largest gains among the top four regions, though, were made by companies based in South Korea. They generated a return of 19.2% for the fourth quarter and a stunning 40.1% for the year. Roughly 80% of the annual gain can be attributed to manufacturing companies.
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