BENEFITING from public equity's strong showing last year, private equity funds in the Asia-Pacific raised a whopping 221 per cent more capital in the first-half of 2008 than they did in first-half 2007. But bleak market sentiment could weaken this uptrend soon.

According to figures from Thomson Reuters, private equity funds in Singapore, China, Hong Kong, India, South Korea, Malaysia, Vietnam and Australia attracted a total of US$16.1 billion in H1 2008, far exceeding the US$5 billion raised in H1 2007. And the number of private equity funds increased, to 41 from 29.

Private equity funds in Singapore raised US$15.7 million in H1 2008. One was Sirius SME Growth Fund, set up to provide funding for small and medium-sized enterprises.

According to UOB Venture Management (UOBVM) executive director Aw Chye Huat, strong public equity markets boost the portfolios of institutional investors, which leads to a corresponding increase in funds available for investing in private equity.

'Fund-raising takes time, so the announcements on the closing of funds in early 2008 would have been for commitments made by limited partners (investors of the funds) in 2007, when the public market was still doing well and the amount allocated to private equity high,' he explained.

The founder and managing partner of CMIA Capital Partners, Lee Chong Min, also said that 'asset allocations in favour of private equity are generally increasing due to high returns generated by private equity funds'.

There is strong global interest in investing in Asia, particularly China, Mr Lee noted. The region's investment environment, such as legal infrastructure and corporate governance, has also improved, he said.

But Dr Aw believes that the slump in global public equity markets will cause limited partners to become more cautious. 'It is likely that the amounts raised in the second half and early next year will be lower. However, limited partners seem to be generally still upbeat about the return potential of private equity, so the decrease may be moderated.'

While private equity fund-raising in the eight Asian-Pacific regions rose in H1 2008, investments by the funds fell a slight 8 per cent to US$4 billion from a year earlier.

Current market conditions have made investors more careful about parting with their money, said Dr Aw. 'For late-stage investors, the exit picture is misty - it is very uncertain when the market will recover to provide exit channels for their investments,' he said.

Nevertheless, he pointed out that UOBVM's investments increased in H1 2008 compared with the same period last year, due to 'attractive opportunities'.