Two quarters in, Asia's private capital market appears as uncertain as ever.
Last year, we repeatedly heard two mantras. First, Asia's private capital market would grow at substantial rates and, second, that GP consolidation was inevitable.
These 'virtual certainties' no longer seem so certain.
As fundraising continues to stagnate, there are doubts about previous growth forecasts. And research1 suggests that close to two-thirds of Asia-Pacific LPs expect new manager formation to outpace consolidation.
Asia's fundraising environment continues to slow
Fundraising for Asia private funds continued to slow in Q2, perhaps unexpectedly, considering the current geopolitical environment and the still subdued exit market.
Looking at longer-term data in this edition of Analysis, the Q2 figures for both fund count and capital raised are the lowest since Q3 2022 at least.
The silver lining for Asia private capital in this quarter's figures is that US fundraising dominance has started to decline.
Our Q1 Analysis was published hours before the announcement of wide-ranging tariffs by the US government. The final form of these tariffs remains fluid, and uncertainty remains around US trade and foreign policies, which we expect will dampen international investor appetite for investment in the US - at least in the short term.
Q2 global allocation data appears to show this effect. If this effect develops into a trend, Asia private capital may benefit from a reallocation of capital.
However, Asia faces fierce competition from Europe, which appears to be an early winner in the race for reallocated capital. Europe-focussed fundraising as a percentage of global fundraising grew to ca. 33.1% in Q2, while Asia-focussed fundraising stood at ca. 11.6%, down from ca. 12.6% in Q1.
As in the last quarter, Mainland China remains the most active fundraising geography. 63% of funds launched in the quarter named China as the preferred geography for investments, and domestic commitments within Mainland China continue to dominate.
Overall, Asia LPs committed a higher percentage to Asia private funds in H1 2025 (96%) compared to 2023 (94%) and 2024 (90%).
We expect that the market for raising blind pool funds focussed on Asia will remain extremely challenging in Q3. As in previous quarters, project funds and smaller thematic funds, especially in healthcare and biotech, are likely to have the best chances of success.
Liquidity – something's gotta give?
In the quest for liquidity, there are signs that something has to give soon. During Q2, media reports suggested that large institutional investors were considering the sale of LP interests.
This could be an indicator of LPs now being willing to accept the discounts in the LP-led secondaries market to be able to rebalance their portfolios.
If exits and fund distributions do not recover in time, this trend could accelerate fast – discounts can increase quickly if there is a critical number of sellers in the secondary market.
In markets outside Asia, GP-led secondaries may have taken the pressure off GPs to an extent. We do not believe that the same will be true in Asia, as GP-led secondaries in Asia have remained relatively flat since 2022.
According to Evercore data, Asia secondaries accounted for only 3% of the global secondaries volume in the GP-led market in 2024, against a share of global private fundraising of currently 11-12% (and, in prior years, around 20%).
This aligns with a survey of LPs in Bain & Company and ILPA's Leaning Into the Turbulence: Private Equity Midyear Report 2025, which found that 63% of LPs favour conventional exits - if necessary, below mark. Only 17% favoured continuation vehicles (ie, GP-led secondaries).
This is not to say that GP-led secondaries cannot be a useful tool that creates value for LPs. Good quality secondaries funds have their place and will continue to deliver value (as they have shown in Q2 – please see below). However, GP-led secondaries are unlikely to be the solution to current liquidity issues.
The jury is still out on listed evergreen PE funds as a solution too. We noted the growth of this product in our Q1 Analysis. Both Hong Kong and Singapore are seeking to establish a framework for this product (see our latest article on Hong Kong's efforts here).
Both GP-led secondaries and listed evergreen PE funds are technically complex solutions. Our expectation is that conventional exit routes will remain the favoured option – when they open again – with GP-led secondaries and listed evergreen PE funds used opportunistically for the right strategies/assets and target investors.
A loss of momentum in dealmaking
As reported in the Financial Times in June, private market funds have underperformed large-cap US stocks over commonly measured time horizons for the first time in nearly a quarter of a century, as a slowdown in private equity dealmaking activity hampers the sector’s returns.
This tracks our commentary in the Q1 Analysis, where we dared to suggest that the convergence in multiples from private and public markets might lead to better conditions for both private and public market exits as pricing became more uniform in both markets and high multiple expectations were tempered.
However, we made our hopeful predictions before the announcement of the US government's tariffs on 2 April and the slowdown in private equity dealmaking continues in Asia. We began the year with a certain amount of momentum and positivity in the markets, but this has subsided a little in Q2, with buyout activity remaining broadly flat and exits falling dramatically.
As mentioned above, there is a feeling that there needs to be a quest for liquidity as suggested by data from Bain/ILPA.
It is unlikely that we will start seeing a rush to the exit for managers where there will be a mark down in value, given the knock-on effect for future fundraising.
However, LPs are starting to become more vocal in their demands for liquidity and this could spur movement in the market if it continues to impact on fundraising activities more broadly.
Bright spots
Q2 did feature a few bright spots of dealmaking, in Japan and domestically in China. Anecdotally, we have also heard of more managers starting to look to investment opportunities in China.
While they are in our view not the solution to the current liquidity crisis, the secondaries market had a strong Q2 as the recent vintages have outperformed.
If secondaries can continue to command increased discounts to NAV when buying buyout funds, then we could see increased activity in this space.
Finally, it wouldn't be a report on private capital if we didn't mention private debt and its increase in focus. According to the State Street private markets index, private debt posted the best return for last year of all strategies in the index, recording a 9.11% gain on average.
Sources: Preqin and Pitchbook
Endnotes
- https://www.collercapital.com/42-barometer-summer-2025/global-private-capital-barometer-42nd-edition-summer-2025/
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