UBS: Asia LPs continue outbound push

Asian investors are increasingly favouring US and European investments over their home markets as liquidity in the region is still deemed an issue, according to Markus Benzler, UBS’s multi-manager head.

For Asian limited partners, liquidity is still an issue in the region, Markus Benzler, head, multi-manager private equity, real estate and private markets for UBS Asset Management, said in a media call ahead of the UBS Asset Management Viewpoints Summit 2017 in Singapore.

“There has been a lot of money flowing into Asia pre-financial crisis and until today we see there are a lot of LPs demanding increased liquidity to harvest their portfolio,” Benzler added.

This has led LPs, especially Asia-based institutional investors to deploy capital outside of Asia. The region’s remarkable growth story five to 10 years ago drew Asian investors to invest locally or in their home market, but that has now shifted to increased requests from LPs UBS engages with, to seek investments in the US and Europe, Benzler pointed out.

“For example Korean insurers or endowments would previously invest in local private equity. Nowadays, they want more regional or global exposure,” he said.

He also noted that Asian LPs are getting “more and more sophisticated” in the asset class.

“Private equity in Asia started a decade ago and over time LPs have built up their understanding of the asset class. We also find that investors are increasingly concerned about their own resources and their own capabilities, whether on the multi-manager side, fund commitment side or direct investments.” Benzler noted.

UBS AM invests on behalf of institutional investors such as pension funds, sovereign wealth funds, insurance companies, family offices. The fund of funds manages over $10 billion in private equity and has increasingly favoured small and medium-sized buyouts as well as the growth capital space.

The firm has made commitments to EQT Partners’ 2016-vintage, $1.6 billion European mid-market fund; The Carlyle Group’s 2013-vintage, $13 billion Carlyle Partners VIl; and Apollo Global Management’s 2013-vintage, $18.4 billion Apollo Investment Fund VIII, PEI data show.

While the firm has been European-centric over the last two to three years, its investments are now more spread out globally and covers the Asian mid-market and late primary private equity deals.

Kasper Wichmann, executive director at UBS Alternative Funds Advisory, added that the firm has been investing in Asia since 2000, with the bulk of its portfolio deployed in China because that’s where the opportunity set was years ago. However, that has expanded over the last decade into India, Australia and Japan, where private equity as a capital solution is getting more acceptance domestically.

“From 2010 to 2015, the private equity industry was very much driven by the US in terms of returns, contributions and investment demand,” Benzler said. “Over the last two years, we have seen significant investment demand in Europe as well as in Asia.”

“Asia in our view now, has emerged to become a standalone market, with its own dynamics. Ten years ago it was mainly China and India, but it has now become a much broader market with a couple of very significant regions which have to be considered if you talk about private equity,” Benzler said.