Tracking the increase in Asian LP investment in private equity remains an anecdotal game, but there has been a landslide of anecdotes in the past two years. And there is every expectation this will further expand in 2025.

Cambridge Associates, which has more than USD 200bn of private assets under management and some 6,800 GP relationships, has seen the most growth in interest from endowments, foundations, and family offices. The outlook for continued participation in the coming year is supported by idea that interest is a function of a gradual institutional maturity rather than a reaction to macro stimuli.

“Asian investors are increasingly becoming a major driving force as global asset allocators, and their interest is well received by the global GP community which is thinking about business concentration risk,” said Judy Zhang, a managing director at Cambridge, who was recently promoted to partner effective 1 January.

“You don’t want to have all your LP base to be a single type or from the same geography. Asian investors offer different profiles in life cycles, liquidity needs, and macro exposures.”

Cambridge is fielding regional LP interest evenly across its bases in Singapore, Beijing, and Hong Kong. Beyond endowments, foundations, and family offices, the firm has detected an uptick in interest from corporate pools of capital, including insurance companies, although this has mostly stayed close to more conservative plays in secondaries and private credit.

Asante Capital, a global placement agent with a team of 10 in its Hong Kong office, has mapped out about 160 Asia-headquartered institutional investors that invest regularly in private equity, including sophisticated family offices. The vast majority only participate in their core markets. Many invest only in the US.

“We have raised capital from Asia for Asia, and from new LPs as well, which gives us a little bit of confidence,” said Ricardo Felix, Asante’s head of Asia.

“Australian super funds will always have an allocation for Australian GPs. The big four Malaysian pensions right now are prioritising Southeast Asia or a big angle on Malaysia. The Thai national pension fund and Thai insurance companies are building up their PE portfolio for the first time.”

Looking outward?

A key question for Asian GPs in 2025 and beyond is whether this nationalistic approach will be diversified. Most of these organisations have programmes for the US and Europe but remain only sparsely active outside their home markets in Asia.

It is hoped that regional sovereign wealth funds (SWFs) will lead the way in terms of reaching beyond national borders, taking their cue from Singapore’s Temasek Holdings and GIC. Japan Investment Corporation is often flagged as prospective in this regard, although AVCJ has no records of it making Asia ex-Japan fund commitments.

Indeed, it appears that Asian SWFs investors are less likely to invest in their immediate region than their global peers.

Asia represents only 50% of allocations for Asia-based SWFs, according to a study by the Carnegie Endowment for International Peace. North American SWFs, by comparison, put 72% of their capital to work in North America. European SWFs are 73% in Europe.

Still, the expected ramp-up in home market LP support could be a game-changer in the current fundraising environment. This is a palpable notion in India, where domestic capital – currently about 15%-20% of local fundraising – is projected to reach 30%-35% in the next few years.

Amicus Capital, a GP founded in 2015 by former executives of Carlyle [NASDAQ:CG] and True North, closed its second fund earlier this year with about USD 200m in commitments, tallying commitments from National Investment & Infrastructure Fund (NIIF), two insurance companies, and some large family offices.

Mahesh Parasuraman, a co-founder at the firm, expects incremental capital coming into Indian private equity to be more than 50% domestic across the next five years. Importantly, many of these investors will not have the financial weight to invest in the largest local funds, let alone funds outside the country.

“Insurance companies started investing in private equity three to four years ago, writing USD 1m-USD 2m cheques. Now some of the large ones have moved to USD 10m. They can go to USD 15m-USD 20m in the next cycle because their pools of capital and allocations will change,” Parasuraman said.

“That’s assuming that the EPFO [the USD 247bn Employees’ Provident Fund Organisation] does not have an allocation to alternatives. If that is allowed, suddenly you will see an explosion. I see India as a very large pool that is stable and will participate in the India growth story. Maybe the top 10-15 managers that do well will be able to attract this capital.”

Finding a balance

Increased activity by Japanese LPs will play out with different dynamics. Kirk Shimizuishi, Japan private equity leader at EY, believes that domestic LPs will push more into alternatives on the back of strong returns, improved sentiment for private equity, and a continued low-interest rate environment.

One additional driver may be a need to outflank rising competition from foreign investors. Shimizuishi noted that recent fundraises by Japan-only GPs that have historically relied heavily on domestic capital have been highly oversubscribed with strong new demand from overseas LPs.

“This shows the growing demand and focus towards local PE funds, which have been primarily backed by domestic LPs,” he said. “Given this development, the market is seeing domestic LPs needing to be more aggressive in their stance towards existing domestic GP fundraises as well as expanding their LP allocations to also include first-time and new PE funds.”

In Japan, these actors will be predominantly insurance companies, regional banks, and pension funds. Regionwide, the more impactful groundswell will be at the family office end of the market.

In Singapore, for example, the number of family offices registered with the Monetary Authority of Singapore has ballooned from 400 in 2020 to 1,650 as of mid-September. Many of these will be phantom structures, but the trend is useful in sketching out the direction of travel.

Cambridge’s Zhang observed that, in a distinct contrast between Asia and the West, she works increasingly with first-generation entrepreneurs, who created their family wealth and still manage it. This is believed to suggest potential for relatively greater interest in funds.

“Most of these family businesses in Asia are still in operation and are still giving dividends, or they’ve just recently sold out,” Zhang said.

“The family office is still young and in the first or second generation. So, they don’t have the same spending needs as their counterparts in the West, which typically have been around for multiple generations. That frees up the capital more for longer lockup vehicles in areas like private equity.”