Private market investors in Asia are seeing investments with ‘true alpha’ returns — the excess return of an asset than its benchmark — despite the ongoing market volatility, according to some of the region’s top investors.
“What we see in Asia, and what some investors are looking for in Asia, is what we call true alpha — the ability to generate returns regardless of what is happening in the public markets,” said EQT Asia chairman Jean Eric Salata.
Speaking at Hong Kong’s third annual Global Financial Leaders’ Investment Summit on Wednesday, Salata said the “uncorrelated pools of liquidity” and “under-penetrated private assets” are seen to be creating such returns in the region.
Exits in India were part of what was driving returns for EQT last year, at a time when the US market was unable to deliver distributions due to subdued activity. Meanwhile, the National Stock Exchange of India climbed its way up to one of the world’s largest trading venues that year.
Asia is also under-allocated by global institutional investors, said Salata, despite representing half of the world’s GDP. This mismatch and imbalance are what’s attracting more and more investors toward the region’s unrealised potential.
Earlier this week, EQT set a $14.5 billion hard cap for its latest Asia buyout fund, which has a target of $12.5 billion. Its Asia business, formerly known as BPEA EQT, acquired Southeast Asian real estate technology platform PropertyGuru in a take-private deal valued at over $1 billion. Later that month, it also invested in the Australian school management platform Compass.
Economic slowdown, high interest rates and geopolitical tensions are a cause of concern for investors. However, some fund managers believe that challenging times separate the winners from the losers.
“The best businesses are born and made in the most difficult times,” said Zhang Lei, founder and chairman of pan-Asian investment giant Hillhouse. “I couldn’t think of a better environment for stress testing the best entrepreneurs.”
From Japan to China, there is no lack of great businesses and entrepreneurs to back, he added.
Nisa Leung, managing partner at Qiming Venture Partners echoed the sentiment. “I think the best return deals that we’ve ever made are during these difficult times.”
Qiming’s portfolio includes TikTok owner ByteDance, consumer electronics designer and manufacturer Xiaomi, shopping platform Meituan and video-sharing platform Bilibili.
“Because valuation and funding have decreased so much, it’s a really good time to invest in startups,” said Qiming’s Leung.
