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HarbourVest eyes secondaries in Asia-Pacific

Changing appetites for private equity among Australia's superannuation funds is said to be fuelling secondaries dealflow in the Asia-Pacifc.

As primary private equity markets further mature in Asia-Pacific, particularly in Australia and Japan, secondaries buyers are finding varied opportunities, according to Tim Flower, a managing director in HarbourVest Partners’ Hong Kong office.

Tim Flower

In Australia, a lot of the country’s superannuation funds are selling off their private equity portfolios and committing less capital than they have historically, because of regulatory pressure related to fees paid across all asset classes in their portfolio, he said.

“There is an incredible focus on fees in Australia,” said Flower. “This focus is causing supers to pull back from private equity in spite of the strong returns they have generated. The supers have been the biggest supporters of the local private equity community and if they stop supporting local managers there will be a consolidation in the number of general partners.”

HarbourVest has as a result also been working on GP restructurings in Australia, where some local fund managers will struggle without the superannuation funds anchoring their funds.

“There will either be a reduction or a consolidation in the number of GPs that will actually make investments going forward,” Flower said.

HarbourVest has also engaged in GP restructurings in Japan, although the market hasn’t seen as much secondaries activity.

“On paper at least, Japan is a potential market for restructuring opportunities and we are working on these complex situations, but the market as a whole has not experienced the level of secondary activity we’d expect, especially when you consider the amount of capital raised in Japan and the number of large funds with a diversified limited partner base,” Flower said.

Last year HarbourVest committed to Asian GP NewQuest Capital Partners, according to PEI’s Research and Analytics division. NewQuest closed its latest direct secondaries fund on $316 million last week. NewQuest Asia Fund II will invest into Asia’s emerging economies, including Greater China and India, as well as Japan and Australia.