Asia private equity piques investor interest as distributions top global averages, despite fundraising headwinds

[SINGAPORE] Asia-focused private equity (PE) funds are piquing investor attention with distributions outperforming global averages in 2025, as well as in four out of the past five years, highlighting the region’s role as a diversification play.

Data from private markets solutions provider Hamilton Lane showed distributions from Asia-focused PE funds hit 8 per cent in 2025, beating the 7 per cent global average.

“Not only are we close to marking a record year in terms of total distributions, it is actually the second-highest in history,” said Collwyn Tan, the co-head of Asia investments at Hamilton Lane.

The lion’s share of these distributions comes from trade sales, referring to the selling of PE assets to other strategic investors or multinational companies seeking exposure to Asia’s growth.

Tan said that this is a good sign of exit avenues being more diverse, rather than concentrated on exiting via public markets.

Asia’s structural growth story continues to underpin its appeal. The region accounts for more than 50 per cent of the world’s population and 60 per cent of global growth, he noted.

The PE market in Asia is maturing as more capital flows into buyout funds. Tan pointed out that in 2025, buyout funds made up 28 per cent of the US$104.9 billion in total funds raised, up from just 19 per cent in 2021.

“Now, Asia is entering a phase where you really have to own the asset with deep governance, where you’re really rolling up your sleeves operationally to create value.”

The performance gap between the US and developed Asia buyout funds has also been narrowing, with the opportunity cost between investing in PE in Asia versus the US becoming negligible compared with a decade ago, he said.

“Gone are the days where investing in Asia is an opportunity cost, and is a ‘good to have’, not a ‘must have’.”

Tom Kidd, head of Bain’s South-east Asia PE practice, said that the data has shown more capital is flowing towards larger regional funds and in particular, large buyout funds. This is due to their ability to deploy flexibly across different countries and look for the best risk-adjusted returns.

“There is still a very clear set of successful regional funds in the market that have an expertise in finding opportunities,” he said.

Funds have picked up on this interest. PE player EQT announced on Apr 21 that its largest Asia-Pacific focused buyout fund, BPEA IX, closed US$15.6 billion in total commitments.

The fund’s targets are established Asian businesses with cheque sizes of between US$300 million and US$3 billion.

Uneven recovery

However, the recovery in Asia’s PE market remains uneven.

Fundraising has been challenging in recent years, with Asia-Pacific-focused funds raising US$58 billion in 2025, down from US$92 billion in 2024, a report by Bain showed.

South-east Asia is behind the S-curve compared to India, Japan and South Korea, noted Janice Leow, head of private capital in South-east Asia at EQT.

But as companies in the region mature with founder transitions and generational change, the buyout potential in South-east Asia will increase significantly, she said.

“I wouldn’t say that the fundraising environment is improving, and I think there’s a lot for PE to prove,” she added. “But (for) the funds that have been able to give returns consistently well, fundraising is not a challenge.”

Investors are placing greater emphasis on a manager’s ability to consistently deliver exits – a key differentiator in a more constrained environment.

South-east Asia in particular has an issue on this front. In 2025, the region delivered just US$4 billion out of the US$150 billion in exit value in Asia-Pacific.

This makes fund managers who have a track record in delivering exits even in a challenging exit environment more attractive, said Leow.

Looking ahead

Market observers noted that the investors in PE funds here are now getting a more even mix between global and Asia-based investors, compared with mostly Asia-based investors before.

Hamilton’s Tan said that this is in part due to Asia’s trade being more insulated from global geopolitical and macroeconomic uncertainties, making it attractive for investors seeking uncorrelated assets or assets that perform independent of traditional markets.

For BPEA IX, the bulk of investors were from Asia and Europe, reflecting growing demand for regional exposure.

Early signs of recovery are emerging, with higher deal activity in South-east Asia during the first quarter of 2026 compared with a year earlier. But Bain’s Kidd cautioned that tariffs came in Q1 2025, and the impact of the war in Iran was not fully felt yet in Q1 2026.

“But we saw some very hopeful green shoots in the first quarter of this year, so I think if some of the uncertainty in the market subsides, our hope is that we’ll see that continue for the rest of the year,” he added.

Tan said that the days of easy money, where fund managers can just plop money into the biggest trends and see what happens, are over. Investors are looking for fund managers who can differentiate themselves in terms of strategy.

“More importantly, you need to convince the founder and the seller of the assets why you should be the right one,” he added.