India Tops Asia-Pacific Investment Rankings, Attracts Strong LP Interest

LPs are passive investors in a partnership who contribute capital but do not manage daily operations. Their liability is limited solely to the amount of their investment. They share in profits and losses but lack voting or management rights.

India was ranked the most attractive private markets destination in Asia-Pacific, with "31 per cent ranking it first and 76 per cent placing it within their top three choices," reflecting strong conviction among institutional investors. This growing preference comes even as the broader Asia-Pacific private markets landscape has contracted in recent years due to geopolitical shifts and macroeconomic pressures.

Despite the regional slowdown, India has emerged as a relative outperformer. Private equity and venture capital investment activity expanded "1.6-fold to $207 billion between 2016-20 and 2021-25," while exits "more than doubled to around $120 billion" over the same period.

The country's share of Asia-Pacific PE and VC deployment has also risen significantly, from about 12 per cent in 2015-19 to roughly 21 per cent in 2020-24, highlighting its growing importance in global capital allocation.

Limited partners are backing this shift with capital. India now accounts for more than a third of all Asia-Pacific investment exposure among surveyed LPs, with European investors showing particularly high exposure at around 60 per cent. Overall, surveyed LPs allocate about 64 per cent of their India exposure to private markets, signalling strong confidence in the country's long-term growth trajectory.

The attractiveness is anchored in structural growth drivers. Investors rate factors such as entrepreneurial talent, India's GDP, economic growth and domestic consumption highly relative to other markets. Sectorally, capital remains concentrated in scalable, demand-driven industries, with nearly three-quarters of PE capital between 2021 and 2025 flowing into five sectors led by technology (29 per cent), financial services (15 per cent), and IT services (13 per cent).

Investor preference is also evolving toward more mature strategies. LPs show stronger enthusiasm for buyout and growth equity, scoring them 7.8 and 7.7, respectively, on a 10-point scale, compared with lower preference for earlier-stage investments. Co-investments are gaining traction as well, accounting for about 25 to 28 per cent of deployment value in recent years, with 54 per cent of participating LPs reporting outperformance versus fund investments.

However, the report flags structural challenges that could temper momentum. India's private capital intensity relative to GDP remains modest, and capital deployment is concentrated in a narrow set of sectors. Additionally, fundraising is skewed, with the six largest general partners accounting for 64 per cent of capital raised between 2022 and 2024.

Limited partners also cite operational hurdles, including currency risk, a complicated tax regime, and the difficulty of doing business and contract enforceability, as areas needing improvement. Addressing these concerns, alongside improving exit pathways and deepening capital markets, will be critical to unlocking broader investor participation.

Even so, investor intent remains firmly positive. More than 50 per cent of LPs plan to increase allocations to India-dedicated funds, while only 5 per cent expect to reduce exposure. As global capital continues to rebalance across Asia, India's combination of scale, growth, and improving market maturity positions it as a central destination for private market investment in the years ahead.

- ANI