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Sara French

For the first time in Asia, traditional private-equity funds took a back seat to their upstart venture-capital peers during the first half, according to an industry publication.

Asian firms raised a total US$5.5 billion in funding for private companies in the first six months of the year, up 22 per cent from the same period last year, said Asia Private Equity Review.

Of this, 55 per cent was venture capital, money intended for younger private companies.

'This is the first time venture capital has accounted for the lion's share of the fund pool,' said Kathleen Ng Yuen-fong, the publication's editor and publisher.

On the investment side of the ledger, regional firms committed US$1.7 billion in the first half, an increase of 25 per cent from last year.

Much of this investment activity was fuelled by the hot market for Internet ventures and cooled dramatically once technology stocks hit a rough patch in April. Regional fund firms invested US$619 million in Internet-related businesses in the first quarter but only US$141 million in the second quarter.

Even so, Internet and information-technology businesses received more than half of the capital invested in the first half as a whole, marking another first for Asia.

'The Internet era has had a significant impact on the industry, not only in the amount of capital raised but also in luring experienced fund managers,' Ms Ng said.

The dotcom scramble early in the year set off a wave of management turnover as experienced venture capitalists jumped ship to take jobs with Internet ventures.

Of 34 senior fund managers who resigned, 15 per cent took positions with dotcom companies and, of six second-tier fund managers who quit, all took dotcom jobs.

Hong Kong led the way in both raising and investing funds. Firms based in the SAR raised US$1.7 billion, or 30 per cent of the region's total, and invested US$400 million, or 24 per cent of the regional total.

A single fund, Chase Capital Partners Asia's maiden fund, the Asian Opportunity Fund, accounted for most of the capital raised through Hong Kong.

It closed in late May at US$1.1 billion, or 44 per cent more than its original target of US$750 million.

Ms Ng said that this set a new benchmark for 'mega' funds in Asia.

Graphic: fund31gbz



Asia venture-capital first sets benchmark for mega funds