Equity firms battle to raise cash in Singapore

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SINGAPORE: When private equity fund managers descended on Singapore for two weeks of conferences, culminating in the Formula 1 Grand Prix, many were expecting it to rain money.

The stage was set for pension funds, family offices and other institutional investors to deploy more of their record cash piles into the Asia-Pacific region, the world’s fastest-growing private equity market over the past decade, at some of the city’s first mask-free conferences since the pandemic.

Instead, general partners found themselves surrounded by rivals hunting for investors who kept a low profile at gatherings like SuperReturn Asia.

The ratio felt like it was 10 fund managers to one investor at one event, several participants said.

A family office executive added that they’d been on both sides of the money for more than a decade and never seen such aggressive efforts to raise cash.

Failing to attract fresh funds adds to the challenges for the industry as slumping financial markets and valuations make it harder to exit investments.

The crunch is most acute at smaller, newer firms trying to establish relationships with limited partners, while giants like KKR and Co and Blackstone Inc continue to lure money from long-standing investors, even as China and other Asian economies slow.

“In terms of fundraising, we’ve definitely seen quite a dramatic decline for Asia-Pacific funds,” said Angela Lai, a senior research analyst at Preqin.

“If you compare this year to last year, it’s quite a mark, especially for China-focused funds.”

A glance at the historical numbers may suggest Asia is bucking a global private equity slowdown.

Investors pumped US$8.6bil (RM41bil) into “re-ups,” which refers to allocating more money to existing relationships, this year through Oct 7, according to Bloomberg data.

This is an increase from US$2.9bil (RM14bil) a year ago.

Over the same time period, new fund investments more than tripled to US$1.6bil (RM7.6bil).

But much of the funding is going to the big-name managers who are considered safer prospects in times of financial stress.

For the broader industry, momentum is weakening. According to Preqin data, total assets under management for Asia-Pacific private equity firms increased by 94% between 2017 and 2021, reaching US$554bil (RM2.6 trillion).

That’s now expected to grow by just 43% between 2021 and 2025 to hit US$793bil (RM3.7 trillion).

“Middle-market managers tend to be the ones getting squeezed,” said Niklas Amundsson, partner at Monument Group Inc, a global private placement agent.

In late September, thousands of investors and money managers arrived in Singapore to kick off meetings across the city.

Hotels, ballrooms and drinking holes heaved as Asian portfolio companies, fund managers and analysts were finally able to meet in person after two years of border, mask and quarantine restrictions.