Private equity’s mountain of dry powder is a danger sign

Investors keep flocking to private equity in Asia even though returns are declining. They should take heed - payouts are likely to get worse from here, rather than better.

The hunt for yield in a low-interest world has spurred institutional investors from China Investment Corp to Japan’s Government Pension Investment Fund to join the rush into the alternative asset class. Private equity firms founded by veterans of Warburg Pincus and KKR & Co are seeking to raise at least US$4.5bil for new funds in China, Cathy Chan of Bloomberg news reported on Thursday, in the latest sign of the region’s burgeoning appetite for nonpublic investments. New York-based KKR, meanwhile, is targeting more than US$12.5 bil for its fourth Asian fund, which would surpass the record US$10.6bil raised by China’s Hillhouse Capital Group in 2018.