For Edmond Ng, a managing partner at Axiom Asia, shuffled policy priorities and slower economic growth in China are responsible for the most significant about-turn in the firm’s 20-year history. E-commerce is one of several cases in point.

“The rapid expansion of some e-commerce platforms was creating pressure on local jobs and businesses. The Chinese government has taken steps to mitigate this, as they believe capital should not determine the outcome of a certain industry,” Ng said.

“So, the demand for foreign capital by Chinese businesses has dropped substantially. Going forward, it’s not going to be easy to put money to work in China at the same level as they have in the past.”

The country used to account for as much as half of Axiom’s early fund-of-funds. In the seventh vintage, which closed on USD 1.28bn earlier this year, it will only be 5%-15%, according to a presentation deck shown to AVCJ. Axiom declined to comment on its allocation across markets.

The firm backs small to mid-cap GPs to tap into Asia’s domestic consumption growth, chiefly through consumer-facing technology, healthcare, finance, and traditional retail. There is now a preference for buyout funds in China: managers with experience in control investments, hands-on value creation, and domestic and overseas listings. However, the pool of suitable candidates is shallow.

“GPs that have shown they can really roll up their sleeves and help their portfolio companies improve their operations, or have a track record of actually taking control of companies and running them successfully…Those types of GPs are more interesting to us,” Ng explained.

Conscious of the difficulties with exits from a historically growth capital-centric Asian market, Axiom expects Fund VII to be more buyout-heavy than its predecessors.

The fund is USD 502m smaller than Fund VI, reflecting a more challenging fundraising environment globally, and for Asia-based managers specifically. The rollback in China effectively covers the difference between the two vintages: other, more buyout-friendly geographies will receive about the same in terms of dollar value but account for a larger percentage share of the corpus.

Individual allocations to Australia, Japan, and South Korea are expected to be in the 15%-25% range, the presentation deck shows. The significance of Australia is nothing new – it has been Axiom’s second-largest market after China since Fund III – while Japan’s share has increased gradually over several vintages.

The Korea allocation has historically fluctuated considerably. This is a consequence of economic cycles and the availability of funds suitable for Axiom in a relatively small market, Ng observed.

Regional rejigging

Ng was part of Axiom’s founding team, most of whom came from GIC, in 2006. A leadership transition in 2016 facilitated the current managing partner line-up of Ng, Alex Lee, Chris Loh, and Marc Lau. The staff of 51, half investment professionals, operates out of Singapore and Taipei, managing USD 9bn in assets across primary fund commitments, co-investments, and secondaries.

Until the most recent vintage, Axiom’s fund sizes followed an almost unbroken upward trajectory: USD 440m, USD 950m, USD 1.15bn, USD 1.03bn, USD 1.39bn (plus a USD 210m co-investment vehicle), and USD 1.8bn. There is also a USD 338m opportunity fund, which closed in 2021, a year after the sixth flagship fund-of-funds.

Fund VII fell short of a USD 1.8bn target cited in US regulatory filings. However, Ng noted that the firm is satisfied with the result given the difficult conditions. The LP base is mainly institutional investors from the US and Western European countries. According to Ng, the US share used to be 70% but has decreased with each vintage. In Fund VII, Europe overtook the US for the first time.

While Axiom has steadily added more developed market buyout to what was a China growth-oriented proposition, the firm isn’t turning its back on minority equity strategies. These will be the mainstay of an India allocation that is rising slightly and will be on par with China in Fund VII.

India and China remain highly reliant on public market exits. A drop-off in activity on mainland China bourses saw the former end the latter’s 20-year dominance of PE-backed IPOs in 2024, according to AVCJ Research. At the same time, a rich vein of post-listing trades has propelled India to first or second place in Asia for exit proceeds in each of the past four years.

This is a domestic story, driven by increased participation in equity markets by a largely retail investor base. Axiom has noted the improvement, but it remains to be convinced that India can be institutional and international, delivering the consistent, large-scale exits China achieved post-2000 through the likes of NetEase, Sina, Alibaba Group, Tencent Holdings, JD.com, and Pinduoduo.

“Unlike China tech, which has a very proven track record of getting liquidity from the US market, India tech so far does not have the same kind of popularity in the US. That may change. But until then, we are still going to be more cautious,” Ng added.

Other discrepancies between the two economies must also be factored in. First, Ng noted that India has yet to match the consumer spending power of China circa 2006-2007. Second, the global low-interest-rate environment that enabled the flow of cheap capital into scale-at-any-cost Chinese start-ups has now passed. India’s ability to retell the China story ultimately rests on its growth.

As for Southeast Asia, Axiom is opportunistic in its approach, prioritising buyouts. Fragmentation – the region is a collection of discrete economies – and competition remain challenges. While valuations are more attractive than relatively expensive India, foreign investors are up against local capital, notably well-resourced and well-connected family groups and strategic investors.

“Domestic capital tends to have a deeper understanding of market dynamics and is nimbler with its business network. In many cases, unless the deal size exceeds what domestic players can take on, international capital may find it harder to participate meaningfully,” Ng said. “This is common across Southeast Asia. To a certain extent, it contributes to elevated valuations in India as well.”

Directs and secondaries

Axiom typically makes primary fund commitments to 20-25 managers per vintage. Sometimes, these fund-level relationships have a limited lifespan: GPs become larger and more established, which means they attract broader institutional investor interest and have less use for fund-of-funds. However, Axiom may still work with them in other areas.

“We help them get started and in many cases we are instrumental in launching their first funds. That gives us a strong, long-term relationship, which often extends into direct and secondary opportunities,” Ng said.

In addition to primary fund commitments, Fund VII will have 25% in secondaries and an unspecified percentage in direct investments. Direct exposure could exceed 30 positions. Past deals include lunar exploration business iSpace and taxi and ride-sharing platform Newmo in Japan, and LiDAR developer Hesai Technology and salvage vehicle auction platform Boche.com in China.

Direct investments are primarily sourced through portfolio GPs. While Axiom will work with non-portfolio GPs, using such opportunities to better understand managers as well as to get access to choice assets, this does not automatically lead to a fund commitment, Ng cautioned. The firm tries to be upfront in making this distinction, allowing GPs to make informed co-investment decisions.

In terms of secondaries, Axiom participates in LP-led and GP-led transactions. The firm enjoys greater flexibility than specialist investors in the space, demonstrated by how it leant into the strategy during Funds V and VI when COVID-19 was causing market dislocation, according to Lee.

Secondaries are once again seen as a compelling opportunity in Asia. The key factors are a weak exit environment and many secondary buyers stepping away amid geopolitical uncertainty, which have contributed to more attractive valuations. Axiom believes the strong ties with managers that come from being a fund-of-funds investor lead to better secondary deal flow.

“This positioning enables the firm to underwrite and price deals more effectively than secondary-only investors,” said Lee. “When pursuing GP-led secondaries, we prioritise high-conviction transactions where we possess deep familiarity with the underlying assets, the GP’s track record, alignment of interests, and value-creation plan.”

Through the latest opportunity fund, Axiom is acquiring stakes in top-tier companies from founders, financial sponsors, and other investors looking for liquidity. These deals can be structured as direct investments or single-asset continuation vehicles. The fund is 70% deployed across 14 companies, including Hong Kong logistics player Lalamove.

China remains of interest for this strategy, but there is increased emphasis on India and Korea. For the opportunity fund – and across Axiom’s wider secondaries coverage – the prevalent theme is stranded investors looking for a way out.

“That has to do with the fact that these markets are characterised by more minority investments, so the GPs are not in control of exits as much as buyout fund managers are,” Ng said.