Asia-Pacific’s private equity market plummeted last year — as investors’ appetite for risk fell in the face of inflation and geopolitical tensions, according to Bain & Company.

The total deal value for the region plunged by 44% to $198 billion in 2022, the global management and consulting firm said in a Tuesday report. That’s compared to $354 billion in 2021, the analysts said adding that nearly 70% of surveyed fund managers expect the negative trend to continue into 2024.

Lingering macroeconomic uncertainties alongside rising costs and worsening company performance that dampened investor sentiment, Bain said in its Asia Pacific Private Equity Report 2023.

“Investors, sensing a new era of slower growth, mounting inflation, and greater uncertainty, took time out to recalibrate their strategies, recognizing that what worked well in the past may not be the right approach for 2023 and beyond,” a group of authors from Bain’s Private Equity practice including Kiki Yang said in the report.

“If the conditions—macroeconomic uncertainty, poor company performance, and a decline in deal activity—that prevailed in 2022 persist, valuations may continue to contract as fund managers adopt a wait-and-see attitude,” Bain wrote.

Deal value in Greater China fell by 53% as investors grappled with the nation’s zero-Covid policy, it said, leading declines in the wider region. China and India accounted for a drop of $35 billion in total deal value for large growth deals for the year, Bain said.

The number of deals for utilities and renewables rose 47% compared to a year ago, the report said, noting Australia’s Macquarie Group’s offshore wind business Corio Generation secured an investment of roughly $1 billion from investor Ontario Teachers’ Pension Plan.

General partners surveyed by Bain say they will continue to hone in on ESG-related investment in the following years, it said.

“Half of the GPs we surveyed plan to significantly increase their effort and focus on ESG in the next three to five years, up from 30% three [years] ago,” Bain said.