The ability to dynamically shift private markets exposures across a range of asset classes and investment vehicles will increasingly be key to winning mandates from big institutional investors in Asia boosting alternatives allocations now, predicts Peter Wuffli, chairman of Zug, Switzerland-based Partners Group AG.
More and more, clients "come to us and say, 'here are $500 million. I want you to invest this in private equity, private debt, private real estate, private infrastructure'" — across Partners Group's own funds, secondaries or primaries — and '"adjust it dynamically over time, depending on the opportunities,'" Mr. Wuffli said in a recent interview in Singapore. He declined to discuss specific clients.
Such "flexible mandates" from clients based in the Asia-Pacific region accounted for $4.1 billion of the $65.9 billion in assets under management Partners Group reported as of June 30, up from $1.3 billion out of $34.3 billion in total assets five years ago, said Jenny Blinch, a Zug-based spokeswoman for the company. (2012 figures are based on the June 30, 2012, euro-dollar exchange rate.)
The same "strategic partnership" trend can be seen among European and U.S. clients with long track records investing in alternatives, many of which are looking now to streamline private markets fund and manager lineups that have grown unwieldy and "complicated to handle," Mr. Wuffli said. Roughly 15% of the firm's total AUM, or $10 billion, was invested in flexible multiasset-class strategies as of June 30, up from 5% in 2012.
But a growing number of big Asian investors are skipping the 10- to 15-year learning process that saw their North American and European counterparts invest initially in funds of funds, and then move on to a bevy of individual private equity, real estate and private debt funds.
"They want to leapfrog," to benefit from the fact that today there are large global multiasset private markets firms capable of taking on that strategic partner-asset allocation role as opportunity sets shift over cycles, Mr. Wuffli said.
One senior Singapore-based private markets analyst, who declined to be named, said a majority of sophisticated limited partners still opt to handle asset allocation in-house, choosing — for example — "Blackstone or KKR in private equity, Sequoia in venture capital, Actis for emerging markets, Varde for debt and so on."