Demand for private market opportunities is strong among investors in the Asia Pacific region, according to a new industry report jointly issued by Hywin Holdings Ltd, a leading independent wealth management service provider in China, with Liechtenstein-based VP Bank Ltd. and WealthBriefingAsia.
Over three quarters, or 77% of wealth management professionals, perceive current APAC investor demand for private market investment opportunities as strong, while 16 percent say demand is very strong, according to the report, ‘Why Wealth Managers Are the Ultimate Private Market Matchmakers’. The joint report from Hywin Wealth, VP Bank, and WealthBriefingAsia provides a comprehensive overview of the rising APAC private markets and explains why wealth managers are an invaluable part of the ecosystem serving investors.
As the world enters a new era of fluidity and volatility in the aftermath of the COVID-19 pandemic, private markets are being “re-discovered” as an ecosystem for discerning, patient and strategically minded investors. Wealth managers are the ideal advisors for clients seeking private market opportunities as they have unmatched multi-disciplinary capabilities, relationship-building skills, and institutional clout.
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“Innovation and disruption are fueling a boom in private markets globally,” Hywin Wealth Chief Executive Officer Madame Wang Dian says in the report. “APAC has tremendous momentum in terms of private market assets, investors, funding and intermediaries. We think China will continue to be the engine of growth and innovation, whilst Southeast Asia and India are rising as investable private markets.”
Private markets require investors to act on a long-term view, which can never be delegated to algorithms. It’s an ideal arena for wealth managers to showcase their abilities, according to Wang.
The private markets in APAC are fascinating in size and variety. The report sheds light on all the players in the private markets, including high-net-worth (HNW) and ultra-high-net-worth (UHNW) clients, as well as fund managers, portfolio companies, and financial intermediaries, serving as a guide to navigate through this space.
The strongest driver of the private market boom is a desire for outsized returns, 50% of respondents said, followed by a need for greater portfolio diversification, according to 29% of respondents, the report found. Interesting investment opportunities, participating in real innovation, and ESG aims were also key factors observed. The majority of investors in APAC, or 42%, expect a minimum 11%-15% Internal Rate of Return (IRR) from private markets, while 16% of respondents said investors target a 16-20% IRR, and 14% target a 21-25% IRR.
The typical net worth of an APAC private markets investor is over US$30 million, though there is also interest seen further down the wealth scale, in the sub- US$10 million range, according to the report.
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Investors from Mainland China and Hong Kong SAR are perceived as showing the greatest enthusiasm for private markets, while investors from Singapore, Australia and New Zealand are also very keen, the report found.
Investors were most interested in private market opportunities in North America, 36%, followed by Southeast Asia, 33%, and China and North Asia, 29%.
The sector that draws most investor interest was technology, 62%, with healthcare/life sciences, 21%, coming in second.
As the demand for private markets opportunities grows, the biggest barrier for investors is lack of visibility over opportunities, according to 50% of respondents, followed by a lack of confidence or knowledge, 24%, the report found. For wealth managers, a lack of available expertise and regulatory complexity are seen as the biggest challenges.
Hywin Wealth is dedicated to providing industry-leading insights and knowledgeable advisory to both clients in Greater China and the global wealth management industry.
“We are glad to join in publishing this report to share our insights on private markets, where Hywin Wealth has achieved great success,” said Hywin Wealth Chief Financial Officer Lawrence Lok. “More than half of our total client transaction value in fiscal year 2021, or RMB 78 billion, went towards private market investment products. Apart from data and analyses, this report is informed by our extensive client work across private equity, venture capital and hedge funds to offer a lively narrative.”
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