The view from 30,000ft above Asia

Secondaries Investor is in Hong Kong and Japan for the next two weeks to find out if Asian secondaries are living up to their promise.

It’s a 10-hour flight from London to Hong Kong and instead of catching up with the latest Marvel blockbuster I thought I’d use the time to jot down some ideas around Asian secondaries and why I’ve decided to travel here this week.

The story of Asian secondaries is a contentious one. Some participants are adamant the region will deliver; if Coller Capital’s survey last June is anything to go by, Asia-Pacific limited partners will become the most active players in the secondaries market in the next two years.

Others remain sceptical, pointing out that several constraints continue to keep the market in its fledgling state.

“LPs haven’t been pushy enough, especially in the primary funds,” Harjit Bhatia, executive chairman and founding partner at Asia Growth Capital Advisors, told Secondaries Investor last year. The market will accelerate when LPs start demanding change, ranging from asking for new managers for existing assets to forcing managers to sell assets, Bhatia said.

Managers and LPs are positioning themselves for the boom. More than $200 billion has been raised for Asia-Pacific-focused secondaries funds, including funds of funds, since 2008, according to PEI Research and Analytics.

Secondaries participants are staffing up accordingly. Hamilton Lane and HarbourVest Partners both opened offices in Seoul recently, and HQ Capital last week announced it had opened a Tokyo office, its third in Asia.

Hong Kong-based NewQuest Capital Partners also has plans to open in Beijing this year, hiring a former CVC executive to push its mainland Chinese expansion, and the Canada Pension Plan Investment Board, a major player in the secondaries market, opened a Mumbai office in October.

Firms are also bolstering their teams in Asia: Coller, StepStone, HarbourVest and AlpInvest Partners have all either made recent hires or advertised for secondaries investment professionals in the region.

Where are the opportunities likely to be? Well, two areas of the market are attracting the most attention. One is GP-led restructurings, poised to provide billions in dealflow as funds raised between 2006 and 2007 reach the ends of their lives, particularly in markets like India where many GPs haven’t been able to raise successor funds.

The other area is direct secondaries. NewQuest and TR Capital, two of Hong Kong’s major local secondaries firms, focus heavily on directs, and Ant Capital Partners, Japan’s largest dedicated secondaries firm, has allocated about 70 percent of its recently closed fund to the strategy.

Global secondaries players seem convinced the region will eventually deliver on either the direct secondaries or LP fund stake side, or both, as evidenced by their continued expansion into the region.

Whether Asia will deliver is a question I intend to put to HQ Capital’s Lucian Wu and LGT Capital Partners’ Brooke Zhou at Private Equity International’s Global Investor Forum in Tokyo next Tuesday and Wednesday. For anyone who can make it, I look forward to seeing you there.

Will Asia be the secondaries market’s new chapter? Stay tuned to find out.

If you have questions you’d like me to ask LGT or HQ Capital get in touch at adam.l@peimedia.com