The past two years have been a challenging time for private equity investors thanks to low deal activity, falling distributions and a tough exit environment. As a result, they have turned to the secondary market as a common liquidity management tool.

But it is far from the only reason why interest in secondaries is on the rise. Niklas Risberg, director at Franklin Templeton’s secondary manager Lexington Partners, highlighted the market as a good way for asset owners to adjust their private equity exposure.

“In the past, if you wanted to manage your private equity portfolio, every year 20 to 30 per cent of your NAV would go down [via distributions], so you could manage how much that exposure is through downsizing your commitments going forward,” he told the Top1000funds.com Fiduciary Investors Symposium in Singapore.

“Now, when you’re not getting that yield on the portfolio, people are definitely thinking about how they can use the secondary market to manage their exposure.

“You might want to get out of certain strategies, or your allocation might be too large… it’s more like strategic portfolio management reasons for selling, rather than back-against-the-wall [with liquidity].”

Australia’s second-largest pension fund Australian Retirement Trust (ART) is a seller in the secondary market, and head of investment strategy Andrew Fisher said that position helps with resource management.

The A$320 billion ($201 billion) ART has a little less than 10 per cent allocated to private equity across the fund. It has been overweight private equity since 2021.

“It’s the same reason why we’re selling data centres the same day we’re buying data centres,” he said.

“It’s actually a resource-efficiency thing from our perspective, [because] cleaning up the portfolio on a regular basis allows the team to focus on the things that matter. And running off funds towards the end of their life isn’t something that we really want to be focusing a lot of time and energy on.”

But Fisher stressed that selling in the secondary market doesn’t mean just spinning off all the unwanted assets in a package. For one, the package needs to at least have some desirable assets that will be appealing to another investor. Secondly, timing is crucial. “If we are going to clean up [the portfolio], we have to clean up before, like eight years into a seven-year fund life – you’ll get nothing for that,” he said.

Risberg added that selling in secondary markets can also help asset owners get their capital back sooner.

“If you have a commitment that has already distributed 1.8 times your money, and you have just a little bit of a tail left, you can probably afford to take a pretty big discount on that remaining NAV,” he said.

“You can take those proceeds that you get from the tail and reinvest them at a better return probably than that last little NAV, which you won’t get any upside on and have to wait for two or three years before it comes back.”

Fee pressure

ART is generally a seller but not an buyer in secondaries, which Fisher said is partially because of Australia’s regulatory environment. A regulatory guide (RG) issued by the Australian Securities and Investments Commission concerning disclosure of fees and costs discourage secondaries for funds like ART, Fisher said.

Fisher said private markets already takes up 80 per cent of ART’s fee budget and, while there is an illiquidity premium in private equity, “it is not consistently enough to justify the fees”.

“You need the occasional 2021-like experience where you get a big payoff to actually justify the fees over the long term, and it’s very hard to predict when that lumpy year comes,” he said. “That’s why we treat private equity as a long term commitment in our portfolios”.

And if ART was to invest in secondaries, “you don’t get to apply the discount to [underlying] NAV that it comes in [to the secondary market] at on the fees, unfortunately,” Fisher said. “You get full-freight fees, plus secondary manager fees on top, and that’s just too much of a burden for us.”

With that said, asset owners should evaluate the merits of secondaries based on their own private equity allocation status, said Singapore-based head of Asia Pacific at investment advisor Albourne Partners, Debra Ng. For the under-allocators or new allocators in alternatives, which locally include many Singaporean university endowments, secondaries could be a great entry point.

“One of the easy ways for new allocators to get into private markets and private equity is secondaries, because you get diversification [of assets], you get a nice vintage year diversification as well, and a quick start while you build the rest of your program,” she said.

More broadly, Ng also highlighted the flow of wealth and retail capital into the private equity asset class, which institutional allocators should be cognisant of.

“For all the things that we ask our GPs and the demands on fees, they’re raising a lot of assets from the retail and private channels,” she said.

“The retail channels are less concerned about the elements underlying the valuations and so on. I think if a private bank can provide access [to the asset class] to their clients, they’re winning.

“If you want better governance and transparency as asset allocators or the typical institutional LPs, make sure that those kind of principles are in place.”

This article was edited on 28 March 2025 to clarify the impact of Australian regulatory guidance on ART’s involvement in the secondaries market.

Institutional investment in private credit across the Asia-Pacific is failing to keep pace with the region’s strong economic growth and more attractive interest rate environment, according to a panel of investors at the Fiduciary Investors Symposium.

Mercer alternatives investment leader, Johnny Adji, said private credit in the region offers a 200-400 basis point compared to US, yet Asia-Pacific only attracts about 5 per cent of flows.

“I think it’s severely discounted the potential and the investment opportunity in this region,” he said at the symposium in Singapore. “If you look at just, for example, on GDP alone – Asia should have accounted for, say, maybe about 25 per cent.”

He said returns in the 9-11 per cent range in the lower middle market senior direct lending sector compared well with historical private equity returns of 15-17 per cent, given PE managers now had to service greater debt costs in a high interest rate environment.

However, it was crucial to choose the right manager given there were fewer to choose from while investors needed to be aware that Asia-Pacific private credit tended to comprise a much higher percentage of a loan – as high as 25 per cent – compared to US private credit.

CPP Investments managing director and head of APAC credit, Raymond Chan, said recent interest rate rises had created more opportunities for credit investors in Asia, given many international funds remain focused on developed markets.

“The opportunity here is huge,” Chan said. “So that’s why I think we are very aggressive in terms of building out the credit book. Basically, it’s more driven by global reactive value as well as the alpha.”

CPP investments had committed close to $5 billion in Asian private credit. It had also taken advantage of recent market dislocation to upgrade the quality of its book from around CCC to a B or BB credit rating.

IFM Investors executive director and co-head of Australian diversified credit, debt investments, Hiran Wanigasekera, said it was beginning to focus on Asia after expanding into every sub-sector in Australia.

“That’s where our next leg of growth in private credit is going to be,” he said.

Returns in its senior secured direct lending strategy had come down slightly to 9-11 per cent on an unlevered basis with credit spreads in the high-four hundred to six hundred basis point range, he said.

Wanigasekera warned that Asia-Pacific private credit is even more illiquid than in other regions.

“We are very firm in saying that private credit is an illiquid asset class,” Wanigasekera said. “There is no traded position. And especially if you’re playing in Asia, the liquidity level drops off the cliff relative to what you can do in US and Europe. So this concept of secondary exit potential in private credit positions really is nonsense factor in this part of the world.”

A short, 10-to-15-minute survey can help pinpoint how ready an organisation is to adopt artificial intelligence (AI) into its systems and processes, the Top1000funds.com Fiduciary Investors Symposium has heard. 

The so-called AI Readiness Index (AIRI) was developed by AI Singapore (AISG) to help it decided which organisations that approach it for help with AI implementation projects are likely to proceed to completion. The survey is available online for any organisation to take. 

It’s an approach that helps AISG fulfil its mandate of creating collaboration between researchers and industry to develop and, most importantly, to implement AI solutions, and has seen the nation of just 5.6 million people ranked behind only the US and China as a global AI power. 

Laurence Liew, director of AI innovation at AISG, said the survey helps it grade an organisation as AI-unaware, AI-aware, AI-ready or AI-competent. 

“This AI Readiness Index, the framework that we use to engage with customers, was something that we developed back in 2018, 2019 because we were spending too much time, I felt, talking to customers that, in the end, did not lead to an outcome,” Liew said. 

“For those that AI Singapore will do AI projects with, they have to be AI-ready. So this survey started off as a way to shorten my sales process, my sales cycle. It was a very selfish reason, but eventually it became a very powerful tool to allow us to quickly scan through and determine which companies to work with.” 

Liew said AISG assesses a business’s readiness on five issues – organisational; ethics and governance; business value; data; and infrastructure – that it thinks will “determine how successful an organisation is in terms of its AI journey”.  

Business value readiness means there must be a minimum expected ROI on investing in an AI project; data readiness means the data for the project must be sufficient and relevant; infrastructure relevance means having the infrastructure to run the project on  (“not a laptop”); and ethics and governance means recognising there’s a big difference between knowing if you can do something and whether you should do something. 

But the most important, he said, is organisational readiness, and that’s where the survey comes in. 

“All our projects have a requirement [that] if we support you, we co-create a project with you, it has to go into deployment,” Liew said. 

“So even before we start the project, there is an agreed scope of work to be done. So it’s very deliberate.” 

Liew says AISG’s mission is to make the organisations it works with at least AI-aware. 

“We get a lot of requests from people who say you have all these high-end, very advanced courses, can we do more training and so on and so forth, can AI Singapore go and teach Python to everyone?” he said. 

“If you have been in Singapore long enough, you even hear of some politicians saying everyone must go and learn Python programming. My message is: please stop learning Python programming. 

“It does not make sense today for the audience. If you are a super geek, please go ahead, it’s your hobby. But if you think you want to learn Python because you want to analyse some data, it’s a waste of time.” 

Liew said there are much better tools to use, including uploading datasets to ChatGPT and asking it to do the required analysis. 

“What they need [instead], is half an hour, an hour, or one and half hours, introduction to what is AI. That’s about it, so that they are not fearful of AI, they are open and willing to use AI tools.” 

Educating employees about the use and benefits of Ai is critical, Liew said, to avoid HR and other employment-related issues cropping up later on, driven by individuals fearful of the impact AI may have on their jobs. 

“I’m sure all of you will have read in the US, when the US ports wanted to bring in automation, they had the port workers went on strike and so on,” Liew said, said. 

“As more and more companies bring in automation, the first thing that we have learned that you need to do is actually educate the staff about AI, so [raise] AI literacy. If not, you’re going to get a revolt.  

“And obviously you have to have management policies and so on, for retraining, upskilling and so on and so forth.” 

Organisations AISG assesses as AI-competent have sufficient and relevant data to support the project, employ people who can take over the project from AISG on completion, and have a clear ROI target. 

“I’m going to spend $150,000 of taxpayers’ money, how much is Singapore going to get back?” Liew said. 

“What’s your ROI? If it’s one or two-times, I’m not really interested. At least has to be three, five, 10, and so on and so forth.” 

Liew said if AISG goes ahead with a project, it throws considerable resources at it. 

“For every project that has been approved, AI Singapore will co-invest $150,000 in kind. That means our engineers, researchers. The company must put in $150,000, of which 30 per cent must be cash, 70 per cent in kind. Cash comes to us, and that, combined together, allows me to put together a team to work on the company’s project for six months.” 

Liew said AISG’s teams work full-time on companies’ projects, which “not like a typical university where the professor will say, yes, I’ll do the project for you [but] he may only look at your project once a month”.  

“These teams, Mondays to Fridays, nine to six, do nothing but the company’s project,” Liew said. 

“It’s a full-time thing.” 

For more than a decade, emerging markets (EM) debt has, in aggregate, lagged its developed market counterpart. But a constructive macro backdrop echoing the commodities super-cycle that began in the 2000s means that could be about to change, according to Patrick Zweifel, chief economist at Pictet Asset Management.

“Since the peak in April 2011, there’s been a slight underperformance, a slight loss of 0.1 per cent annualised,” Zweifel told the Top1000Funds Fiduciary Investors Symposium in Singapore. “And this is when emerging market local debt started to clearly underperform developed market [debt] as well as US Treasuries, and that has lasted for more than 10 years.”

“So the question that is often raised from investors is, is it still an asset class worth investing in?”

Zweifel thinks the answer is “yes”. But to understand why, it first makes sense to group different EM countries by the macroeconomic factors they’re exposed to: commodity exporting countries versus manufacturers; creditors versus debtors; open economies versus traders; and China, which sits alone.

“The main important distinction when we talk about emerging market debt is the distinction that we make between creditors and debtors,” Zweifel said.

“The reason why they’re very different is because the debtors economies would be much more sensitive to higher global rates and much more sensitive to the dollar, because part of their debts are actually issued in dollar terms.”

During the commodity boom, Zweifel said, commodity-exporting countries returned an annualised 18 per cent while debtor countries returned an annualised 15 per cent as the dollar declined and the US 10-year bond yield declined by more than seven basis points. During the lost decade that followed – when the dollar and 10-year bond yield both rose – the growth of both debtors and commodity exporters declined sharply.

Pictet looks at five macro factors to figure out what will drive the performance of the EM set. Local policy rates are at levels not seen since the commodity boom and are now declining towards neutral levels; global trade is rising, driven largely by EM countries (and Zweifel thinks that, as was the case with Trump 1.0, tariffs won’t curtail global trade but “redistribute” it, because EM markets now trade more and more with each other); and the relative strength of China’s exports.

The US dollar also looks overvalued, Zweifel said, with a possible trigger for reversion coming in the form of policy and growth divergence between the EM and DM countries, while a rebound in local manufacturing supported by rate cuts would be supportive of commodity prices.

“[In the super commodity cycle] all those five factors were positive,” he said.

“When all those factors are positive, it’s a super boom. We now have three out of two – which is not too bad – and two are neutral.”

Zweifel also discussed the outlook for India, the markets of which have become an increasingly popular destination for global capital as investors are drawn to its growth story. Zweifel pointed out that India is a closed economy, highly indebted and heavily indexed to manufacturing, and that, in terms of its debt, it “wouldn’t be the ideal country in which we would be right now”.

“But in terms of its evolution – the reason why you invest in emerging markets is to capture the gross dividend and because of the idea that a poor country will converge towards a richer one,” he said.

“India starts from a very, very, very low level. So despite the fact that it’s, again, a big economy and growing fast, it has a lot of catching up to do. I think there’s this long-term story regarding India that has made it very attractive, because they’re far from being even where China was in the early 2000s. It’s a very long-term story.”

Beyond the chaos, bullying, backsliding and myriad distractions of the second Trump administration, a fundamental and long-overdue rebalancing of the US’s relationships with its key allies is underway, and a “new equilibrium” will emerge. 

Global geopolitics expert Stephen Kotkin, a senior fellow at the Hoover Institution at Stanford University, told the Top1000funds.com Fiduciary Investors Symposium in Singapore that “there’s a lot to be optimistic about in this insanity of Trump and chaos and unpleasantness”. 

“It’s not pretty, but he’s an instrument of processes that are bigger than him,” Kotkin said. Ever-escalating demands for the US to project its power globally had become fiscally unsustainable, and something had to give. Previous presidents had tried and failed to find a solution but Trump – even if in spite of himself – may force the change that’s needed. 

“The US is 5 per cent of global population, 25 per cent of global GDP, and 50 per cent of global military,” Kotkin said 

“Europe is 7 per cent of global population, 17 per cent of global GDP and almost 50 per cent of global social spending. How long could that keep going? It went way longer than we thought. Europe has been pocketing $350 billion a year in US security assurance for more than 30 years, spending [it] instead on their quality of life. 

“I would have taken that deal, and they took that deal because the Americans gave them that deal. That deal is no longer affordable by the United States, and so the rebalancing is underway.” 

Kotkin said the “quality of life social-spending bender” undertaken by Europe but funded by the US could not last. It had to end, and “it took something crazy out of the social media, reality television, real estate, pro-wrestling, beauty pageant side of America that you maybe didn’t know as well, and you know all too well now” to end it, Kotkin said. 

“The rebalancing is making a lot of people angry, but it’s also galvanizing them in very positive ways. The idea that US is losing Europe is just bunk. Do you have any idea what the trade volume is, what the tech transfer is, what the [foreign direct investment] is, let alone the cultural ties? Do you think that’s going away because Trump is going to be in the White House for a few years?  

“No, none of that’s going to go away. It’s just going to come out the other side, with a different balance, a different equilibrium.” 

Right now, politics in the US “couldn’t look crazier,” Kotkin said, andit’s “very hard to understand, it’s very confusing, and Trump doesn’t really know what he’s doing”. 

But the chaos is not part of a cunning master plan. 

“There is no secret here. There’s no conspiracy. There’s no multi-move thing,” he said. 

“That’s not Trump. Trump is all thumbs, literally. And it’s news-cycle stuff, nothing strategic at all.”  

No retreat 

But Kotkin challenged the view that Trump’s posturing and the rebalancing that he’s set in motion signals that the US is retreating from the world.  

“This is not about America giving up its role in the world – all of that is social media rubbish,” he said. 

“This is about a rebalancing of the costs and benefits, and it’s happening, and it’s a mess, and Trump’s version of it is going to maybe even fail to produce a new equilibrium, but it’s going to break the current equilibrium that needed to be broken.” 

Kotkin said Trump is “an unwitting instrument of history” in this respect – and possibly also in others – but investors should look past the noise and the distractions to focus on “what could be the next equilibrium, and how we might get there”. 

“This is a positive story,”  

“Something [that] was unaffordable couldn’t continue, and there’s a rebalancing underway, and it’s going to be very difficult to get from point A to point B, but that’s the journey that we’re finally on.” 

Kotkin said the concept of the “global commons” form the foundation of global prosperity. It manifests in things like “the fact that you can sail a ship on the sea and have your stuff on it and get it delivered”, he said, or that there’s reliable global infrastructure for the internet and financial systems. 

“Everything you do, you’re free riding on the global commons. 

“You don’t pay for it. It’s not part of your cost structure, but it’s a colossal part of your revenue structure. The global commons is what some people are calling ‘the US-led international order’, the rules-based order.”
There is no alternative to the US-led order, Kotkin said, except for the loss of the global commons. The US-led order is imperfect, but it’s the best of all options. 

“If I had a choice, would I create things the way they are? Are things just? Is it an ideal order? Does everybody have a say? The answer is no, to all of those questions,” he said. 

“But you tell me what you got better that provides for the global commons, and then maybe I’ll take it, if you can show me what’s better.” 

The “fiscal insanity” of US deficits blowing out from $4.6 trillion to $7.6 trillion in the space of a single lifetime also had to stop. 

“I mean, seriously, where was that going to come from?” he said. “I don’t know how much economic growth you’re going to generate or how much inflation you’re going to use to pay that off. And remember, when it started, interest rates, you needed a microscope to see them, and now interest rates are normal again. We now spend in the United States more on interest payments than on our global military. Yeah, that’s not going to work. 

“There needs to be a fiscal realignment. The fiscal insanity can’t go on anymore.” 

But there is also a “struggle to the death over institutions” being waged between the left and the right of American politics – which tells us that the institutions must be worth having, and that they are resilient, Kotkin said. 

“The left is going to lose and the right is going to lose, and the institutions are going to win, because that’s what happens in America again and again and again,” he said. 

Trump’s actions and his manner of executing them has galvanised Europeans and Canadians like nothing before him, Kotkin said.  

“Now the Europeans are having these crisis meetings about what to do: 17 per cent of global GDP, can they protect themselves?” Kotkin said. 

“I think they could. There are countries with a lot less than 17 per cent of global GDP, like Russia with 2 per cent, that have a military. 

“How long has Canada been in the doldrums, and now Canada is going to stand tall. Trump has galvanized Canada. 

“This galvanization, long overdue, is fantastic. Again, does Trump understand that he’s doing this? Does he understand that he revived Trudeau’s party in Canada with the idiocy of the 51st state that will never happen? No, of course, he doesn’t understand that. But is it a potentially, really good thing? Certainly beyond doubt. It’s really good thing for America too, if Canada stands up.”