LPs at the AVCJ Private Equity Forum 2024 expressed optimism that exit markets would re-open with the pending change of government in the US, although doubts persist around Asia and liquidity options such as continuation vehicles (CVs).

Dana Johns, head of private equity at the State of New Jersey’s Division of Investment, said there was a sense of relief across the industry immediately following the US election. She said fundraising processes recently expected to take six to 12 months were now on timelines of three to six months – and the confidence is jumpstarting a new liquidity cycle.

“I do think there’s an anticipation of M&A markets opening up as potentially some regulatory changes happen in the US in the next year or so,” she said. “LPs are feeling like they may see some liquidity coming back, and GPs are feeling like they’re going to see a much more open ability to generate DPI [distributions to paid-in].”

New Jersey’s Division of Investment, which has about USD 100bn in assets under management, currently aims to lift its private equity allocation from 11% to 13%. Johns said this would require an aggressive approach, targeting an expanded secondaries opportunity characterised by CVs and net asset value (NAV) loan funds.

Johns described the pension plan as under-allocated to Asia, although this is not due to a lack of conviction. The initial plan is to broaden existing fund-of-funds exposure by adding pan-regional funds. This is hoped to lead to a greater focus on certain sub-regions over several years.

Greg Jania, global co-head of private equity at the Netherlands’ APG Asset Management, also expects distributions via IPO and M&A to increase following the change of government in the US. However, he remains cautious of CVs as an exit channel, observing that they allow GPs to transfer portfolio economics to themselves, secondary buyers, and brokers, at the expense of primary LPs.

“What I worry about is that the future of our industry is still always based around the primary. I know primaries are less important today, but if there’s no primary, there’s no co-investment, and there’s no secondary,” Jania said. “So, if we’re doing everything to squeeze the primary returns, we’re going to find our industry shrinking, not growing.”

APG remains committed to Asia long-term but has reduced its exposure since the pandemic. Jania said the firm needed to see stronger consumer confidence, especially in China, to get comfortable redeploying significantly in the region.

It also remains unclear to what extent the expected opening of exit markets in the US will play out in Asia amidst ongoing concerns around interest rates, inflation, and likely new tariffs.

Phok Jui Heng, a managing director of Asia private equity funds at Caisse de dépôt et placement du Québec (CDPQ), intends to increase his firm’s exposure to the region, but he sees liquidity challenges as an inhibitor of continued deployment. The solution, in part, is to think beyond short-term sentiment factors such as political transitions.

“It’s tough because Asia top quartile today may not be US top quartile, but this is where long-term perspective is needed,” Heng said. “As much as private equity is a bottom-up game where selecting the right GP and the right opportunities, some top-down overlay or determination to stay long in the game is important for us.”