Asia-Pacific Venture Capital Returns Surge, Yet Investor Sentiment Remains Cautious

In 2025, venture capital (VC) in the Asia-Pacific region achieved a notable return of 15.3%, outperforming other private asset classes, according to a report by MSCI. This performance was part of a broader global trend where VC returned 22% overall, leaving private equity trailing at 13.3%. The fourth quarter of 2025 marked a significant upswing for VC, recording a 7.2% return, the best quarterly performance since 2021. Notably, the internal rate of return (IRR) for VC reached 19% in 2025, a substantial improvement from a lackluster IRR of under 5% in 2024 and negative returns in 2023.

Despite these promising returns, investor sentiment towards VC remains lukewarm. A survey conducted by Coller Capital revealed that more than half of the investors (60%) plan to maintain their current allocation to VC in 2026, while 25% intend to decrease their investments. Only 15% of investors expressed intentions to increase their allocations, a slight rise from 14% in the previous year. This cautious stance suggests that while returns are improving, investors are not rushing to capitalize on the resurgence.

Peter Kim, head of Asia-Pacific at Coller Capital, stated that selectivity in the region is a question of how capital is deployed, not whether it continues to flow. This indicates that regional investors are strategically assessing their options rather than broadly increasing their exposure to VC.

Geopolitical factors also weigh heavily on investment decisions in the region. Approximately 47% of Asia-Pacific investors cited geopolitical considerations as influential in their private market allocations, surpassing the global average of 37%. Kim noted that this barometer indicates Asia-Pacific investors are navigating a different set of considerations compared to their peers elsewhere.

In addition to VC, private credit investments are experiencing a decline in interest. Only 29% of investors indicated plans to increase their allocations to private credit in 2026, down from 42% in 2025. Furthermore, 13% of investors are looking to reduce their private credit investments, a slight increase from the previous year. This trend reflects a growing skepticism towards newly established private credit funds, with 70% of Asia-Pacific investors viewing them as less attractive.

Globally, only 18% of investors perceive a systemic issue with private credit, while the majority believe that the risks are isolated. This nuanced perspective on private credit contrasts with the more cautious approach observed in Asia-Pacific, where investors are prioritizing careful evaluation of their investment strategies.

As the venture capital landscape evolves, the Asia-Pacific region's unique challenges and opportunities will continue to shape investor behavior. With a focus on building relationships with general partners, 53% of investors plan to increase the number of such partnerships over the next three years, diverging from global trends where many are reducing their number of general partner relationships.