ADDX expects 30% rise in transaction volumes as private markets rebound; plans to open Middle East office

SINGAPORE-BASED private markets platform ADDX is positive that a rebound in global private equity (PE) deals will drive a 30 per cent rise in its cumulative transaction volumes this year, which is the pace of growth after it hit its earlier target of US$1 billion in April 2024.

ADDX’s expansion into the Middle East will help lift volumes, as it rides on the wave of rising investor appetite for PE, co-founder and group chief financial officer Inmoo Hwang told The Business Times.

He is optimistic that ADDX, set up in 2017, will open an office in the Middle East – its third globally – some time this year. It announced plans to enter the region in late 2023.

Entry into a new market will position ADDX well amid a recovery in global PE markets, which Hwang sees as benefiting from the second Donald Trump presidency, in line with projected gains in public equities.

“While there is debate around the degree of correlation between public equity and private equity performance... we believe that the strong performance of public equity markets is a factor – alongside other elements such as lower interest rates – that is positively impacting the private equity market by creating favourable conditions for exits and deal activity.

“In the case of Trump 2.0 with potential deregulation, regulatory changes can also play a key role in driving a rebound for private equity following a two-year lull,” he added.

ADDX harnesses blockchain and smart-contract technology to make private market assets accessible in bite-sized chunks, reducing the entry investment from typically US$1 million to US$10,000. The platform also provides a liquidity avenue for assets such as private equity, where a premature exit via the secondary market is challenging and costly for individuals. It is open only to accredited investors.

In private markets, S&P Global Market Intelligence reported that the aggregate value of global PE and venture capital deals in 2024 increased for the first time since 2021. Its data showed total deal value rose 24.7 per cent year on year to US$639 billion, even as transaction volumes fell nearly 6.5 per cent to 12,672 deals.

While investment strategists, including those in DBS, think PE markets generally have low correlation to public equities, there are studies such as those by abrdn showing the opposite. This is because some of the key drivers of PE returns – such as corporate profitability, as well as purchase and exit pricing – are influenced by factors that underpin public equity performance.

Driving investor interest in PE, apart from the search for diversification, is the introduction of more semi-liquid products for those with investment horizons that are as short as three months, said Hwang.

These address the bugbear of investors who do not want their capital locked up for years in markets that are usually less liquid than public equities, while having the option to invest in a company’s early-stage development that could lead to substantial returns.

The private assets exchange’s projected 30 per cent growth would, however, hinge on the absence of geopolitical shocks, he added. ADDX intended to meet the US$1 billion target by the end of 2023, but the start of hostilities in the Middle East in October delayed that, as investors fled to safer and less volatile assets.

They are now more comfortable with taking on higher risk, and showing more interest in PE secondaries market, said Hwang.

Secondary PE deals

Secondary PE deals are those in which existing investors sell their stakes to new investors. They also refer to sales of a company stake to a new fund arranged by a PE firm.

Global activity in secondary PE deals in what was previously a niche market has surged in the past few years, as higher interest rates and a slowdown in dealmaking are squeezing the US$4 trillion buyout industry.

The limited exit options led investors and funds to turn to the PE secondaries market, which enjoyed a bumper year in 2024.

French PE group Ardian estimated that the volume of secondary PE deals hit a record high of about US$150 billion last year, which was 10 to 20 per cent higher than 2023.

Turning to the key themes in the PE market this year, Hwang said infrastructure is likely to remain a key focus. China, on the other hand, continues to be “sensitive” because of geopolitical factors, with the appetite for products related to the country shrinking in Singapore in the past few years.

Apart from its headquarters in Singapore, ADDX’s other office is in Chongqing, China. While the platform is considering fundraising options, Hwang said it isn’t actively pursuing them.

The company last raised US$20 million in fresh capital in November 2022 in an investment round led by KB Securities, a subsidiary of South Korean banking group KB Financial Group. This brought its total capital raised to US$140 million since 2017.