Asian family offices targeted in private market lift-off

Private markets in Asia are undergoing a transformation, with wealth transfer and the growing need for diversification playing a pivotal role.

Family offices and high net worth individuals (HNWIs) in the Asia-Pacific region are moving beyond traditional asset allocations in search of uncorrelated returns and long-term resilience.

These quasi-institutional players are increasingly focusing on private markets, with plans to significantly boost allocations to private equity and hedge funds over the next five years.

“With prolonged low interest rates over the past decade and continued volatility in public markets, Asian family offices and HNW investors are increasingly turning to private markets for enhanced returns and diversification,” says LH Koh, head of global family and institutional wealth for Apac at UBS Global Wealth Management.

The headline numbers appear dramatic. Wealthy Asian investors intend to allocate 24 per cent of portfolios to direct private equity investments, 32 per cent to private equity funds and funds of funds, 28 per cent to private debt, and 31 per cent to hedge funds, according to the UBS Global Family Office Report 2024.

Asian HNWIs and family offices are now building "barbell" portfolios, balancing ultra-safe assets like cash and treasuries with less liquid private market investments. They “often model their strategies on institutional investors such as pension funds and sovereign wealth funds, many of which have already allocated 30 per cent to 50 per cent to private markets”, says Mr Koh.

Traditionally, many Asian investors were heavily concentrated in public equities and real estate. “As market volatility, geopolitical risks, and rising inflation challenge these conventional asset classes, family offices are increasingly turning to alternatives for risk-adjusted returns and downside protection,” he explains.

Generational shift

This growing interest is also being driven by a large-scale wealth transfer to younger generations, many of whom are more globally minded and financially sophisticated. Mr Koh notes that next-generation investors tend to favour long-term, innovation-led exposures such as venture capital, private equity and real assets.

Generational shifts are also marked by a change in investment philosophy — from wealth preservation to impact, purpose and legacy. According to Mr Koh, the younger generation of family office principals, often educated overseas and digitally native, are more inclined towards venture capital, tech investing, and ESG-focused strategies. This cohort is not only more comfortable with illiquidity in pursuit of long-term value creation, but also embraces emerging structures such as tokenised funds, semi-liquid vehicles, and digital investment platforms. “They are also likely to pursue direct investments, co-investments, or even launch their own funds or venture arms,” he adds.

The emergence of institutional-style investment teams within family offices has further accelerated allocations to alternatives, including private credit and direct deals. Mr Koh highlights how greater global access, regulatory liberalisation, and the professionalisation of family offices — often supported by firms like UBS — are enabling more disciplined asset allocation and increasing interest in alternatives.

Access to private markets, once the preserve of institutions, is increasingly being extended to HNWIs.

“In the past, private assets were only accessible to institutions, but general partners are now keen to tap into the HNW segment,” says Hou Wey Fook, chief investment officer at DBS Bank. He notes that just five to 10 years ago, mass affluent and private banking clients had minimal exposure to private assets due to structural barriers.

“Today, that’s no longer the case,” he says, adding that DBS now advises clients to allocate 20 to 30 per cent of their portfolios to private market strategies.

The emergence of feeder funds and open-ended vehicles is further democratising access to private equity, credit and real assets, with smaller ticket sizes opening the door to top-tier managers.

“Asian investors seek liquidity options in private markets, favouring flexibility and the ability to adjust allocations quickly,” says UBS’s Mr Koh. While semi-liquid strategies remain popular, increased education and investor maturity are leading to greater comfort with illiquid structures, particularly in high-alpha segments like venture capital and small- to mid-cap funds.

Interest is also rising in the secondary market, where more Asian investors are exploring fund stake sales to manage liquidity in otherwise illiquid spaces.

Family offices are increasingly turning to private equity and venture capital to tap into high-growth sectors, including healthtech, fintech and AI. “These investments provide exposure to structural growth themes and help balance portfolios skewed toward mature, slower-growing assets,” says Mr Koh.

Geographically, south-east Asia and India have become key engines of private capital demand, fuelled by entrepreneurial wealth, high digital adoption, and vibrant startup ecosystems. Meanwhile, Singapore and Hong Kong continue to strengthen their roles as regional hubs for structuring and access, supported by favourable regulation and robust family office infrastructure.

“What we’ve been telling clients is this: you need resilience in your portfolio, and these asset classes offer uncorrelated returns, what we call alpha returns, which are distinct from market-directional beta,” says Mr Wey Fook from DBS. He points to managers like Carlyle, KKR and Blackstone, which generate value through active ownership, enhancing operational efficiency, scaling businesses globally, and leveraging deep networks of executives and advisers. These efforts aim to deliver sustained capital appreciation ahead of public listings.

Private credit

In a “higher-for-longer” interest rate environment, there is growing demand for income-generating alternatives. Private credit — particularly senior secured direct lending and real estate debt — has seen increased allocations as it offers predictable cash flows with relatively lower volatility.

Historically, the demand for private credit has come from institutional investors. However, the next phase of growth may be driven by the retail segment, according to Marion Redel-Delabarre, head of private wealth at AXA IM Alts, a division of AXA Investment Managers, which manages $210bn in assets. “We do expect more retail money entering the private credit space this year, notably from the private wealth segment,” she says.

“These individuals typically invest in funds offering some liquidity and may behave differently from institutional investors during periods of stress, which can create significant volatility.”

Some see the surge in private market interest across Asia as a natural evolution, with HNW families increasingly aligning their strategies with those of institutional investors.

“HNW clients are willing to sacrifice liquidity for returns,” says Malik Sarwar, senior partner at Global Leader Group, pointing to three factors driving the shift: the declining number of publicly listed companies, the appeal of private equity’s risk-adjusted returns, and innovations in product delivery that are making access easier. In developed markets like Singapore and Hong Kong — where institutional investors such as Temasek have helped legitimise the asset class — supportive regulation and growing local specialisation are further fuelling demand.

Yet not everyone shares the same optimism. Amin Rajan, CEO of the Create-Research consultancy, cautions that expectations for private market returns may be inflated. “Investors are flocking into private markets in the belief that the juicy returns of the recent past will prevail into the foreseeable future,” he says.

This is unlikely, believes Mr Rajan. “First, such returns were a product of a unique economic environment where ultra-low interest rates reduced the cost of leverage and booming stock markets provided smooth exit options upon fund maturity.” Neither of these conditions are likely at a time when rates will remain high to anchor inflation expectations from Trump 2.0 and default rates are set to rise, he explains.

“Second, the ‘dry powder’ — capital allocated but not yet invested — remains at an all-time high in private markets, indicating a contracting opportunity set. The new wall of money will dilute the returns,” Mr Rajan warns. “More likely, private markets will still provide good diversification opportunities so long as investors are prepared to accept lower returns.”