All change on the Eastern front

They say good things come to those who wait. For Hong Kong’s Olympus Capital Asia, this rings true. After a GP-led process on the firm’s 2007-vintage Fund III fell apart last year, Canada Pension Plan Investment Board has stepped in to provide preferred equity and a commitment to the manager’s latest flagship fund, we reported this morning.

If you haven’t read about it yet, CPPIB provided as much as $200 million in preferred equity to help the mid-market manager pay off debt related to Fund III, while its $30 million primary commitment helps Olympus on its way to the $750 million target for its Olympus Capital Asia V fund, which has been in the market since 2015.

Predictions that Asia would be the next boom area for secondaries have, until now, failed to bear fruit. The figures are flatlining: deal volume in Asia has hovered at around 6 percent of global volume since 2014, according to data from Greenhill. The market is said to be the next frontier, but the figures don’t seem to bear that out.

But talk to any secondaries market participant in the area and the sentiment is very different. Several deals have given them a sense of optimism. Take Warburg Pincus’s process with Lazard to sell a strip of Asian assets from its 2012-vintage Fund XI, or Swedish manager EQT’s stapled deal involving a commitment to its latest Asia-focused fund. And while it’s not a regional deal, BC Partners doing a $1 billion stapled deal with Lexington Partners has made market participants in the region sit up and take notice.

“We’re getting in-bounds from very blue-chip names, just wanting to have conversations and understand what’s going on,” says Tim Flower, a managing director at HarbourVest Partners in Hong Kong. “The stigma of doing something creative around their own portfolios is decreasing.”

But it’s not all plain sailing. Compared with the US and Europe, the small size of the Asian market has limited the emergence of local secondaries firms. Differences in opinion over valuations also remain a barrier to growth. Many GPs are still reluctant to sell assets at anything less than par, market sources say.

However, Asia seems to be reflecting the modern market, not playing catch-up. GP-led deals accounted for half of its transaction volume last year, above the global average of almost 25 percent, according to Greenhill. These deals are predicted to rise as a proportion of the overall market, so the continent could be well-placed to benefit.

Does the Asian secondaries market lend itself better to GP-led deals than more conventional transactions? Email us: adam.l@peimedia.com or @adamtuyenle