From the start of quantitative easing and in the era of low interest rates in 2010 to 2022, PE deals went from US$568.5 billion in 2010 to a peak of $2,296.8 billion in 2021, based on data collected by PitchBook. This represents a CAGR of 13.5%.
After the pandemic, though, PE deals declined by 98% y-o-y in 2022, according to data collected by PitchBook. However, in 2024, after two years of consecutive decline, PE deals rose by around 20% y-o-y.
Despite a rise in PE deals globally, Asia-focused PE and venture capital fundraising fell to a 12-year low in 2024 amid ongoing trade tensions between the US and China, according to S&P Global Market Intelligence. Market observers have pointed out that exits are a problem given the moribund state of initial public offerings (IPO) in Singapore.
No surprise, then, that funds targeting the region secured a combined US$63.79 billion ($86.48 billion) in 2024, the lowest total since 2012 and down 29% compared with the US$90.02 billion raised in 2023, according to S&P Global Market Intelligence data.
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Only US$5 billion was raised in Asia in the final three months of 2024, a significant reduction from the US$29.75 billion raised in the same quarter of 2023, says S&P Global Market Intelligence. The number of Asia-focused funds in the market also dropped y-o-y to 324 from 732, the ratings agency unit indicates.
PitchBook’s data shows that PE deals in Asia in US dollar terms have been declining since 2021 and stood at US$95.4 million in 2024, down 18% y-o-y. On the other hand, PE deals in Europe and the US surged by 21% and 10%, respectively.
See also: Private equity may have rebounded in 2024, but 2025 is a big question mark
Chue En Yaw, CIO and incoming CEO of Azalea Asset Management, says that from a PE perspective, the US and European markets have recovered. In addition, in the US, the Trump administration is likely to be pro-PE.
PE general partners (GP) are part of Trump’s inner circle. For example, Treasury Secretary Scott Bessent was a senior investment adviser to fund-of-funds Protege Partners from 2011 to 2015. Bessent joined Soros Fund Management in 1991.
“If you have heard about or read about Trump 2.0 and the Golden Age, for the next four years, a lot of investment themes will probably be focused on where the growth areas are. There’s a rollback in carbon emissions and environmental, sustainability and governance (ESG). Some of the positive sectors will be artificial intelligence (AI) and technology. You can see all the tech tycoons sitting [on the front row] at Trump’s inauguration,” Chue remarks.
“In terms of PE outlook, it should continue to do well because Trump is pro-business. I think we might see more inflows of capital into manufacturing onshoring, AI, technology and software,” Chue says. Another sector that will benefit will be defence, he adds. Most of Azalea’s PE funds investments are in the US and Europe, he says.
Azalea’s solution to liquidity
Investors with access to PE are usually sovereign wealth funds, pension funds, insurance funds, endowments, family offices and high-net-worth individuals (HNWI). These are the same investors in secondary funds or continuation transactions.
In Singapore, PE was largely out of reach for retail investors until 2018, when Azalea launched its Astrea IV bonds with a tranche for retail investors. The bonds were backed by cash flows from PE funds.
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PE bonds are a form of collateralised fund obligation (CFO) backed by a diversified portfolio of PE funds.
The Astrea Platform is a series of investment products based on diversified portfolios of PE funds and designed to provide investors with exposure to PE. Through the Astrea Platform, institutions and individuals, including retail investors, have gained indirect exposure to PE funds through the Astrea PE bonds, which are listed on the Singapore Exchange(SGX).
The first two Astrea bonds offered to the public have been redeemed. The latest PE bonds are the Astrea 8 bonds, offered to the Singaporean public in July last year. The Astrea 8 bonds were the largest IPO in terms of IPO monies raised.
The final overall subscription of Astrea 8 PE bonds was 2.8 times of the US$585 million of bonds offered under both the placement tranche and public offers. The total subscription received for the public offers of class A-1 bonds and class A-2 bonds was over $1 billion, which represents a subscription rate of 3.1 times of the $260 million and US$50 million of bonds offered.
Astrea 8 is a PE CFO backed by interests in a diversified pool of alternative investment funds. The funds were acquired by Astrea 8’s sponsor, Astrea Capital 8, owned by an Azalea unit and, ultimately, Temasek, for the PE CFO transaction. Of funds in the Astrea 8 portfolio, around half consists of the same funds as in previous Astrea bonds. The portfolio consists of buyout and growth funds and is diversified across vintages, regions, managers, funds, underlying holdings and sectors.
The quality Astrea 8 portfolio is diversified across 38 PE funds, managed by 27 GPs and invested across 1,028 investee companies. The transaction portfolio has a weighted average fund age of 6.1 years and is mature and cash-generative.
“The funds, on average, are more seasoned than in Astrea 7 and in line with previous Astrea transactions, based on weighted average (WA) age and remaining unfunded capital commitments. The portfolio has been net cash flow positive, and the age of the portfolio’s funds and historical data suggest future distributions will generally continue to outstrip contributions,” Fitch Ratings says.
The portfolio consists of US, European and Asian funds, managed primarily by large GPs with established track records. Fitch reviewed each fund and GP in the portfolio using quantitative and qualitative metrics, including reviewing the GP’s history, resources, capital-raising success and previous fund performance based on information available publicly from third-party data providers and the sponsor.
Overall, the funds in the portfolio have exhibited good performance, according to Fitch. Fitch adds that the GPs in the Astrea 8 portfolio tend to be large, with extensive experience and success raising capital in recent years, which indicates investors’ confidence. The funds also tend to be large and most are subsequent iterations of established strategies.
The wisdom of cycles
“In terms of where we see PE, we pick managers that have gone through different cycles. They have done investment in Trump 1.0, so they will know how to navigate Trump 2.0 in terms of exits and distributions,” Chue says
The investee companies are those which did not take on as much leverage as some of the larger companies. “[The mid-cap and smaller companies didn’t use a lot of leverage, so they weren’t affected by the increase in interest rates. And secondly, as [the managers and founders] do a more buy and build strategy, these companies become more valuable over time,” Chue says.
Some fund managers source investee companies through something called a founders’ network and they have a bilateral relationship with the founders to improve businesses. For example, Warburg Pincus often invests alongside and manages the companies it acquires.
“We will invest alongside our managers as they continue to add value to the companies. They are able to have a bilateral relationship with existing founders who want to bring in professional capital to improve their businesses. So these are the areas that we will also invest alongside our managers into these founder-led businesses,” Chue says, adding that its mid-market fund managers are of a very high quality.
Increasingly, the trend is for bigger fund managers to acquire smaller ones, Chue indicates, citing BlackRock’s announced acquisition of HPS Investment Partners for US$12 billion in December 2024 as an example of a bigger fund manager buying a smaller platform.
Closer to home, Keppel last year completed the acquisition of a 50% stake in Aermont Capital for EUR365.9 million ($511 million). CapitaLand Investment (CLI) is acquiring a 40% stake in SC Capital Partners Group (SCCP) for $280 million and will invest a minimum of $524 million in SCCP’s fund strategies to support the growth of the platform. In December 2024, CLI also announced the acquisition of Wingate Group (which specialises in private credit) for A$200 million ($170 million).
Secondaries now an integral part
Secondaries also provide another form of liquidity. A primary PE fund may purchase a stake in a private company and then sell that interest to a secondary buyer. Sellers gain liquidity, while buyers may find the portfolio claim or assets attractive.
As the IPO market, especially in Singapore, dwindles and exits become increasingly challenging, secondaries have become an appealing segment of the PE market as they allow flexibility for limited partners (LPs) who may want to liquidate or rebalance a portfolio. Buyers of secondaries, meanwhile, may benefit from shorter duration and faster return of capital, potentially discounted access and enhanced transparency into the underlying portfolio or assets, market observers say.
“The past 12 months marked a record-breaking year for the volume of secondaries. Using the secondary market for liquidity and portfolio rebalancing is no longer a one-off decision but now an integral part of institutional investors’ private markets investment strategies,” notes Vladimir Colas, executive vice-president & co-head of secondaries, Ardian.
“This has led to much larger volumes of assets for sale, creating unprecedented opportunities for buyers of scale while at the same time allowing even greater selectivity. As the market grows, funds with significant capital to deploy and the ability to transact the most complex deals will benefit,” he says.
The growth of secondaries is likely from impatient capital. PE requires patient capital, investing for as long as 10 years or more. Won Ha, managing director and head of Singapore & Korea, Ardian, explains that sometimes, PE investors may need liquidity for various reasons.
The motivations of the seller of a PE fund to a secondary are many. “Some investors are stressed and need to liquidate their closed-end fund. Other investors may want to restructure their portfolios. Certain investors may change their mind and want to allocate more capital to infrastructure and liquidate their buyout funds,” Won says. “What we observe is an increasing number of investors use secondaries as a tool to restructure.”
The limitation of PE is the duration of the PE fund, which is often eight to 10 years. “Certain LPs sell and we buy from the LPs. There is an emerging trend of GP-led continuation deals as well,” Won explains. Continuation funds are where sponsors or GPs hold on to assets beyond the typical fund term and, instead of selling the assets to third parties, sell them to their own newly established fund.
According to him, the public markets have been volatile, and some sectors have shown valuation declines. However, because of the lack of transactions in PE deals, the valuation of PE funds remained stable.
“There is no one-size-fits-all approach to valuations. The typical methodology for a buyout fund is comparables, where valuers use comparables and look at the valuations of similar companies which are listed,” Won points out.
He adds that in the last two to three years of the upcycle in interest rates, public markets were affected by interest rates while private markets’ valuations were unchanged. As a result, LPs with a relatively higher exposure to PE may need to divest.
“We are the buyer in a secondary. Our job is to evaluate the project and its future growth,” Won says, adding that Ardian then creates a secondary fund and gets investors in.
“The secondary buyer and the buyout partners (the GP and LPs in a PE fund) are looking at different factors. We are buying the asset at a discount. From our discounted price, if the asset recovers, we can get a return,” Won explains, as compared to the original buyout PE fund, which gets no discount.
“We don’t target specific sectors. We want a diversified portfolio. Secondary funds are a hundred times more diversified than the buyout fund,” Won says.
Challenges arising
As Won explains, the main exit from a PE fund is made by the GP. The “typical” exit managed by the GP is through an IPO or to sell to another LP via a trade sale.
“I don’t think IPOs are unpopular because it’s an important way to make an exit. An IPO takes more time and can take a year or so to come to fruition. If the asset is of a specific value to a structured buyer, the buyer would be willing to buy at a higher price. A trade sale is a clean exit,” Won says.
During a results briefing on Feb 10, outgoing group CEO of DBS Group Holdings, Piyush Gupta says, “The market’s not been ready to be able to take IPOs. We have a solid pipeline. Most years we’ve done a lot of REIT and REIT-related IPOs. If the sentiment turns around, we can take this to market, we’re actually quite constructive. Based on the mandatory pipeline, our budgets have been aggressive. And in the last two years, the actual realisation has been [that] the markets have just not been supportive.”
High interest rates, which have taken a toll on the IPO market in Southeast Asia, have also impacted PE funds in the region. S&P Global Market Intelligence notes that ongoing trade tensions between Washington and Beijing, the region’s exit environment, and a US government executive order prohibiting outbound investments in sectors in China, including AI and specific semiconductors, are dampening PE investor interest in Asia.
Ricardo Felix, partner and head of Asia-Pacific at placement firm Asante Capital, said most of the capital previously intended for China has likely been redirected back to home bases, primarily in the US, while some has been allocated to other Asian markets such as India and Japan, where PE deals are higher.
US pension funds hesitate to invest in Asia-Pacific opportunities because the political or macroeconomic risk does not pay a satisfactory return premium, Felix said. “I’m not seeing that [return premium] on a historic basis. Unless I have a defined bucket to deploy into Asia-Pacific, I might have to stay in my backyard.”
A Bain & Co report last year said the exit channels have largely dried up, leaving GPs with US$3.2 trillion in unsold assets and staunching the flow of capital back to LPs caused by the rapid rise in interest rates.
“These declines in activity have had a chilling effect on fundraising. Slower distributions have left LP’s cash flow negative, crimping their ability to plough more capital back into PE,” the Bain report said.
Buyouts (the most common type of PE funds) typically involve term loans that expire in five to seven years. “Interest coverage ratios among buyout-backed portfolio companies in the US have dropped to 2.4 times ebitda, the lowest level since 2007. That is pressuring GPs to both find liquidity solutions and devise new ways to generate profits through operating leverage. The secondaries space is still small,” Bain says, adding that lenders don’t want the keys to a bunch of troubled portfolio companies.
Till the IPO market revives, taking the PE funds with the best vintage and cash flow as the underlying assets for retail PE bonds could be the best solution for liquidity and democratising PE.
