Asia Offers Most Attractive Investment Opportunities for Emerging Market PE

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The large majority (70-80%) of Asia-Pacific and North American LPs believe their private equity portfolios need modifying to prepare them for the next economic downturn, according to Coller Capital’s Global Private Equity Barometer.

European investors are more sanguine, with only 45% believing their portfolios need modification.

Despite this difference, nine out of ten LPs acknowledge the significant risks to their medium-term PE returns posed by today’s macro environment and high asset prices. When the cycle does turn, almost all LPs expect to see a significant divergence in performance between GPs and between funds.

“We have experienced one of the longest stock market expansions in history,” said Jeremy Coller, Founder and Chief Investment Officer of Coller Capital, “but investors know that winter is coming. They are telling us that differences in the quality of managers’ strategies and teams will again lead to a significant divergence of returns between GPs – just as it did in the GFC.”

Unsurprisingly, investors also expect a divergence between GPs in fund terms and conditions over the next five years. And they generally expect to see the pendulum swinging in investors’ favour. Three in five LPs expect an overall reduction in management fees, and one in five expects an overall reduction in carried interest rates.