Hamilton Lane: ‘Asia is as boring as it gets’

Asian private equity is maturing and starting to mirror the western markets, says Hamilton Lane’s Juan Delgado-Moreira.

The maturing nature of the private equity industry in Asia means it has become boring, said Juan Delgado-Moreira, managing director and head of international at alternative investment management firm Hamilton Lane.

“The Asia private equity market is maturing. It has had a good fundraising year; it is investing slightly quicker, distributing slightly slower, but has an exposure that’s becoming more and more a convergence of what the US looks like,” Delgado-Moreira told Private Equity International.

“It is priced evenly, under-levered, and has had similar volatility characteristics as the western markets. For the first time in my career, this is as boring as it gets and boring is good.”

The market’s maturity is demonstrated by fundraising and distribution figures, which Hamilton Lane expects to be on par with 2016 figures, the fund of funds manager said in its latest report. Fundraising in 2017 finished level with 2015 and 2016 at approximately $30 billion in capital commitments, while Asia-focused distributions reached over $40 billion.

Delgado-Moreira, however, noted that although Asia fundraising fared well in 2017, it wasn’t a market of superlatives. “It is not better than 2013, was nor was it runaway growth versus 2016 and 2015. Some parts of Asia are registering an all-time fundraising record like Japan; we are in the context of a maturing asset class overall and that includes Asia.”

The report also highlighted that although global investors’ exposure to Asian private equity has tripled over the last 10 years, the figures still make up less than 10 percent of their overall global exposure.

“The asset class is now close to $4 trillion globally, therefore if the underlying market has doubled over the past decade and total exposure in Asia has tripled, the region has moved up as a percentage but it is not the same as gaining share in a market without growth,” Delgado-Moreira explained.

Meanwhile, investing has not slowed down. The Asian private market’s share of global contributions continued to increase in 2017, touching $40 billion.

“Asia’s rate of contribution has been trending up. Some people go: ‘Oh, there’s no activity.’ But Asia is a market that is calling capital. In fact on a relative basis, we are actually calling more capital in line with the rest of the world. We can find deals in Asia,” Delgado-Moreira added.

Similar to last year, Hamilton Lane found that venture capital and growth strategies (38 percent) continue to dominate the Asian private equity landscape, while private credit (5 percent) and real assets (2 percent) are still catching up.

“We will go with the boring, slow growth, low interest rate, high valuation, and continued recovery for at least another year,” the report noted.

Listen to Juan Delgado-Moreira’s predictions for Japan and China private equity.