A networking panel in our Singapore office examined the current dynamics of Asia's private capital markets, against the background of SuperReturn Asia 2025.
Paul Robine, founder and CEO of TR Capital, and Ben Harris, Principal at OCP Asia, were joined by HSF Kramer partners Benjamin Lohr and Salonika Rathod, with the panel moderated by the firm's Asia Head of M&A, Malika Chandrasegaran.
In the context of persistent limited liquidity and significant changes to the architecture of global trade, the panel discussed three aspects of Asia's private capital market: fundraising, private credit and secondaries.
Market headlines
- Geopolitical shifts: Panellists agreed that although tariffs have not had a significant impact on portfolio companies yet, there is a notable shift in investor sentiment towards Asia and Europe.
- Secondaries as a key exit route: The growing importance of secondaries in private equity (as opposed to private credit) – particularly GP-led deals and direct secondaries – was a recurring theme, with panellists highlighting the benefits of faster DPI and liquidity for sellers and the financial upsides for buyers.
- Private credit opportunities: Private credit is a promising strategy in Asia, with opportunities in various sectors and geographies. Private credit positions itself as an alternative source of capital for growing businesses and an asset class with strong downside protection for investors. The panel noted factors such as the regulatory/legal system in a jurisdiction and, more generally, tailwinds of banks scaling back from certain sectors/types of borrower drive allocation of capital. The panel also emphasised the importance of strong controls over investee group in the finance documents.
Fundraising challenges
What is LP sentiment towards Asia-focused strategies and where do GPs expect to raise capital?
Shifting themes: A year ago, SuperReturn discussions centred on GP consolidation, GP stakes and geopolitical tensions between the US and China and India and China. This year, discussions have shifted to exits, private credit and evergreen capital vehicles. China's diminished investment appeal in 2024 is showing early signs of rebalancing as the US market's dominance is moderating.
Exits and liquidity challenges: Exits remain a central concern in equity investments, with distributions at all-time lows compared to net asset values. Liquidity solutions, in particular through secondaries, are a hotly-discussed area. Due to the nature of private credit with defined terms for loans, exits are not much of a concern in private credit. There is some optimism that distributions will soon accelerate, especially considering the buoyant Hong Kong IPO market.
Regional fundraising trends: Data shows a steady decline in the number and volume of Asia-focused funds raised since 2021, with private equity experiencing the greatest drop. China's fundraising is now largely domestic, while North American investors are focusing on Southeast Asia and India, and Europe is beginning to benefit from capital shifts away from the US. While the moderation of the US private capital market's dominance has not resulted in increased fundraising in Asia in the data available to us, panellists agreed that international investors' sentiment towards Asia, and in particular China, is improving. However, allocators are seeking regional funds rather than country-specific funds to ensure geographical risk diversification.
Geopolitical and economic influences: Currently, tariffs are not materially influencing portfolio companies or manager's broader approach to investment selection.
Private credit's rise in Asia
What can we expect from the Asia private credit market?
Growth drivers and market segmentation: Private credit is one of the fastest-growing segments in Asia, fuelled by banks retrenching from certain sectors and mid-sized corporates seeking alternative financing. The market offers structuring flexibility and speed of execution, with hybrid debt-equity structures and distressed debt opportunities becoming more common.
Regional focus and deal execution: SEA presents abundant infrastructure expansion and resources-related opportunities. With dedicated local teams from funds actively engaged on the ground—cultivating relationships with family-owned businesses and borrowers, and navigating operational challenges—the complexities of bank syndication often make bilateral transactions with firms the preferred route, offering greater speed and flexibility.
Market saturation and competition: While interest in private credit is increasing, the market is not yet saturated due to the wide range of investment strategies and the critical importance of local knowledge and expertise.
Legal structuring and downside protection: Robust legal structuring is critical, including adequate to detailed due diligence, offshore guarantees, security over key assets, and control over cash flows. Structuring varies by jurisdiction, with more granular protections required in certain SEA markets, and the use of hybrid instruments and board representation to enhance oversight.
Secondaries momentum maintained
Will Asia see more GP-led, direct or LP-led secondaries, and which forces will shape these transactions?
Catch-up growth of secondaries market: Secondaries have become the largest exit route in Asia, with the unrealised value of five-year-old or older funds growing from $523 billion in 2023 to an expected $2 trillion in 2025. However, global asset allocators' commitment to Asian secondaries remains low, creating a supply-demand imbalance and significant opportunity. Available data puts the size of the Asian secondaries market at 2-3% of the global market, disproportionately less than Asia's share of the total global private capital fundraising.
Secondaries market evolution: The market has evolved from defensive LP-led to GP-led portfolio deals and is evolving further now towards direct, more active secondaries, where secondary investors are acting as liquidity providers for partial exits with the dual purpose of proving the selling GP's valuation of the asset and accelerating distributions to the selling GP's LPs. This shift is driven by appetite for greater control and thereby risk reduction compared to what is available in GP-led secondaries, especially in Asia where GPs generally have less of a track record.
GP-led transactions and continuation funds: While there have been a significant number of GP-led deals in the market in Asia, GP-led secondaries are complex and require large teams for due diligence and structuring. We expect that it will be larger Asian GPs with international LPs that successfully execute such deals.
Active portfolio management remains crucial: Active secondaries, where investors take board seats and influence management, are increasingly necessary to ensure timely exits. This approach is moving the market closer to a buyout model, allowing secondary investors to step in and effect change if needed.
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