Asia’s value as a private equity investment market is its ability to offer geographic and thematic diversification opportunities uncorrelated to the United States. But history suggests one must take money off the table, said Jean Eric Salata, Chairperson of EQT Asia on Wednesday (5 March).

In his keynote interview at the AVCJ Private Equity Forum Australia & New Zealand 2025, Salata told interviewer Rachael Lockyer, head of Australia Private Equity, MLC Asset Management, the region has an important role to play in long-term investors’ portfolio construction.

“If you’re a pension fund manager and you’re allocating the bulk of your portfolios to the US stock market or US private equity you’re essentially making a huge bet on AI.”

But Asia’s varied markets, he said, offer structural alpha, great and undermanaged assets, and thematic opportunities across various high growth sectors.

The region also offers geographic diversification with a third of the firm’s last two funds invested in India, 15% in Australia and zero allocation to China, he said.

EQT Asia is diversified across three overarching sectors: healthcare, technology and domestic focused business services, the latter of which negates geopolitical risks.

“We don’t do a lot of businesses that involve trade flows and exporting goods, which is where a lot of the geopolitical risk is today,” he said.

Ongoing trade disputes are creating uncertainties in boardrooms and are going to start weighing on the US economy if they don’t get cleared up, he added. “But we are not getting caught ‘in the whipsaw that’s going on at the moment.'”

Salata pointed to EQT Asia’s investment in Indira IVF, the largest fertility clinic chain in India. The profitability of this business is not going to be affected by Fed rate moves, a US recession or if Nvidia’s stock rises or falls 20%, he said.

India and Japan, which are both key EQT Asia markets, are benefiting significantly from government-driven reforms and structural tailwinds, Salata told Lockyer and a packed auditorium.

Under Prime Minister Modi, India has had a very pro-business political environment for the past decade. The emergence of a real middle class of several hundred million people, investments in digital infrastructure and the emergence of an IT services industry has created a domestic growth story that has been “fantastic” for EQT Asia’s returns.

“Now we are also seeing the emergence of domestic stock market with real liquidity and depth equivalent to Hong Kong and Japan,” he said.  “And into this there is something like USD 40bn to USD 50bn of new capital flowing into the stock market from retail investors.”

The Indian stock market has been one of the best performing markets globally and, from an IPO standpoint, has offered real liquidity since 2023 when U.S. stock markets were shut.

Salata also pointed out the emergence of India’s buyout market. Ten years ago buyouts amounted to USD 2bn but that rose to USD 10bn last year and in the next five years will be worth USD 50bn to USD 60bn annually, he predicted.

Japan is also benefiting from structural tailwinds, he said.

Firstly, “you have an incredible amount of shareholder reform and stock market reform that is being driven by the government partly to address the fact that savers’ pension-fund returns have been zero over the last three decades.”

The government has shaken up entrenched corporate managers, who have run businesses very conservatively. It is forcing the 50% of Japanese listed companies that trade below book value to improve shareholders.

The Japanese authorities “are basically saying that if a shareholder comes to you with a proposal you can’t ignore it like in the old days, now you have to engage”.

Over 100 shareholder activist funds are going after Japan to shake things up, he said. This is creating literally “dozens and dozens” of private equity deals including take-privates and corporate divestitures.

And like India, there is a huge flow of middle-class retail investment creating stock market liquidity.

Japanese government tax incentivization’s last year resulted in USD 90bn of capital inflows into the stock market.

Despite all this, the real alpha being generated in Japan is because a lot of companies there are under managed. There’s a lot of scope to do a lot of interesting things with these businesses, he said.

Salata highlighted that a unique aspect to Australia is its trade deficit with the United States. So in terms of the geopolitics around trade and tariffs Australia should be very well positioned, he said.

The country is quite insulated from a lot of the noise in the world and delivers diversification benefits that can no longer be achieved simply “by piling into that next big LBO fund in the United States”.

And there are some great businesses here, he said citing investments in Compass Software, a K-12 vertical SaaS software company, and Icon Group, a cancer treatment business. Australia’s track record ok private equity returns are “as good as anywhere in the world, if not better,” he added.

Exits and risks

That’s not to say Asia is not without its risks, cautioned Salata.

Investors do a really good job of building value but “time and time again” they fail to take money off the table, and then something happens in the macro or industry environment.

“If returns are not realized then they’re not real. That’s why we consistently take money off the table,” he added.

He noted it’s a bit of a myth that Asian private equity liquidity is not good. “That probably was the case in the past but it’s improving,” he added.

Asia’s developing and deepening IPO markets “have been a really good source of liquidity”, he said. There’s also been the development of a much deeper and responsive sponsor market, which is very encouraging and is now probably just as significant as it is in other parts of the world.

“And more recently we’ve seen also the development of continuation vehicles. We, for instance, are in the process of a USD 14.5bn exit of one of our oldest and largest investments via a new investment vehicle that’s going to be a ‘private IPO,’” he added.

Looking forward, he said, there is an emergence of more strategic interest in assets.

“We are already seeing this among some of the local strategics in India and Japan where they know they need to shake things up and create a growth trajectory,” he said.