Southeast Asia-based limited partners (LPs), the biggest proportion of which is constituted by family offices, are allocating more to private assets, according to a Preqin report.
The number of family offices in Southeast Asia has grown to a third of the total investors as of June 2024 from a fifth in 2020, the private market data platform showed.
As the region gets wealthier, Singapore has also been trying to lure family offices with favourable policies such as the variable capital company structure. The number of family offices in the city-state touched 1,400 by the end of 2023, as around 300 more were launched during the year to tap the Singapore government’s tax incentives and investor-friendly economic policies.
Preqin said that almost 50% of APAC family offices are now headquartered in Hong Kong and Singapore. “To combat rising interest rates and geopolitical risks, 39% of APAC family offices plan to increase exposure to alternatives,” the firm pointed out in its report.
Following family offices, corporate buyers emerged as the second largest source of investors, while the third group included banks, asset managers and wealth managers, per Preqin data.
Sovereign wealth funds, despite a smaller number, have been pivotal in driving the growth of private capital markets in the region, the report said.
Take Singapore’s Temasek, which has increased its allocation to unlisted assets from around 20% to 52% over the past two decades. The S$389-billion ($298 billion) sovereign fund said earlier this year that private markets have delivered returns above the cost of capital and higher than the listed portfolio.
It has seeded investment firms and committed to funds such as 65 Equity Partners, Heliconia Capital, Novo Tellus, Decarbonization Partners, and LeapFrog Investments, among others.
Malaysia’s Khazanah Nasional Berhad has also consistently allocated around 20% to private markets between 2018 and 2023. It said in the 2023 annual review that the role of private markets in its portfolio was to provide higher-than-expected returns over the long term.
Malaysian pension fund KWAP, in the past 12 months, has also launched two initiatives to back private equity and venture capital funds, the $1.27-billion Dana Pemacu and $107-million Dana Perintis, respectively.
Overall, the proportion of Southeast Asia-based investors that are investing in private equity and venture capital has increased in recent years, from 18% in 2022 to 31% by June 2024, Preqin said.
Venture capital has been the biggest pocket of their portfolio, while these LPs are also increasingly eyeing private debt.
In terms of geographies, emerging markets took centre stage for Southeast Asian LPs in H1 2024, while this part of the world experienced the least interest in 2022 and 2023.
