Rising allocation to alternatives has been an unstoppable trend in recent years, with more Asia Pacific (APAC) investors particularly seeking outperformance and diversification in private markets. Developed in collaboration with Hywin Wealth and WealthBriefingAsia, VP Bank launches “Why Wealth Managers Are The Ultimate Private Market Matchmakers”, a report that delves into the phenomenon of private markets investing in the region.
- Over three-quarters - 77% of - respondents believe that current client demand for private market investment opportunities is strong, with 16% saying it is very strong.
- The potential for outsized returns is seen as the strongest driver by far (with this achieving 50% of number one rankings) followed by greater diversification (29%). However, interesting investment opportunities, participating in real innovation and, to a lesser extent, ESG aims were all cited frequently as top-three factors.
- Although 45% see the typical investor in private markets as having a net worth of over US$30m, plenty of respondents see interest further down the wealth scale – and even in the sub-US$10m range.
- Respondents see private market investors in APAC as tending to be entrepreneurs who are younger than the average private client (they also identified a slight bias towards males). However, the range of responses given suggests diverse interest needs to be catered for.
- Industry participants see investors from Mainland China and Hong Kong SAR as showing the greatest enthusiasm for private markets, although those from Singapore, Australia and New Zealand are also very keen.
- While North America is still seen as exerting the strongest pull for investors, only slightly fewer (33%) respondents say Southeast Asia is where they are mostly seeking investment opportunities, with China and North Asia not far behind (29%).
- Although around a fifth of respondents see investors favouring energy, infrastructure, consumer or “other” opportunities like education, technology dominates in terms of investor interest (62%), with healthcare/life sciences (21%) coming second.
- Investors in Asia Pacific have highly ambitious returns targets from their private market investments: although advisors say the majority (42%) expect a minimum 11-15% Internal Rate of Return (IRR), 16% target a 16-20% IRR and 14% target a 21-25% IRR.
- Advisors see APAC private market investors preferring direct over collective investments where possible (67% vs. 33%). However, most respondents (60%) see investors wanting to allocate only US$1-5m to each opportunity and a range of formats and entry routes are seeing favour, with venture and growth capital, direct lending and leveraged buyouts standing out.
- For investors, the biggest barrier to private markets is lack of visibility over opportunities (cited by 50% of survey respondents), followed by a lack of confidence or knowledge (24%).For wealth managers, a lack of available expertise and regulatory complexity are seen as the biggest challenges in the private market space