The macroeconomic environment is starting to find a new normal after 2022 saw a drastic shift in interest rates, prompting institutional investors, including Asian asset owners, to venture to lesser transparent private equity markets.
Still, fundraising is not yet up to speed, and geopolitical and macroeconomic concerns related to China have hit overall Asia-Pacificing fundraising hard, data showed.
A new global survey from Goldman Sachs (GS) on private markets sentiment shows increasing optimism about investment opportunities compared to 2022.
More than 200 limited partners (LPs) in form of institutional investors/asset owners and general partners (GPs) in form of asset managers across private market strategies showed increasing optimism about investment opportunities compared to a year prior, according to the survey conducted in June-July.
About 64% of respondents said they see improved investment conditions, while 22% describe the conditions as stabilising.
That is broadly what some asset owners based in Asia have told AsianInvestor as well.
One of the asset owners determined to deploy capital into private markets is Korea’s Teachers’ Pension.
In the first half of 2023, the pension manager for private school employees emphasised private debt — specifically, distressed situations and direct lending strategies.
For the latter half of 2023, Lee Kyu-hong, chief investment officer at Teachers’ Pension, told AsianInvestor he expects the overall framework will be similar, supplementing allocations in the first half of the year.
“In terms of alternative investments especially, we will focus more on equity rather than loan or debt,” Lee said at AsianInvestor’s 15th Institutional Investment Forum Korea in Seoul in June.
The GS survey finds that the top non-investment challenge for GPs is fundraising, which has grown more difficult, and the trend is reflected in Asia Pacific too.
Aggregated capital raised by private assets in Asia Pacific decreased by around 63% in Q2 2023 year-on-year, compared to 41% globally, according to data from Preqin, an alternative investment data provider.
This trend is mainly led by slower fundraising of China-focused and Asia-Pacific multi-country funds, which accounted for over 58% of total capital raised by Asia-Pacific funds in 2022, the APAC Q2 2023: Preqin Quarterly Update showed.
“As China’s economic structure is under the adjustment stage and seeking new engines for its economic growth, investors may find the short-term market outlook of China unclear and become hesitant to deploy capital into China-focused funds,” Henry Lam, associate vice president for Research Insights at Preqin, told AsianInvestor.
The uncertainty of China makes it harder for investors in Asia Pacific’s private markets to rely on a backward looking factor like track record – which is an LP's primary factor when evaluating GPs, according to the GS survey.
“Although Asia-Pacific multi-country funds also invest in other Asia-Pacific country markets, given the huge size of China economy, those funds are still inevitably exposed to the China market,” Lam said.
The Goldman Sachs Private Markets Survey surveyed 46 GP firms and 166 LP firms.
The LPs come from asset/wealth management, endowment, family office, foundatio, insurance, private pension, public pension or retirement system, and sovereign wealth funds or official institutions,
Geographically, 59% of respondents are from the Americas, 13% came from Asia Pacific, and 28% from Europe, the Middle East and Africa.