Fire sale of sought-after fund raises alarm over Asia private equity slump

SINGAPORE – For more than 20 years, Indonesian private equity firm Northstar Group was emblematic of South-east Asia’s boom. Backed by TPG Capital, it raised more than US$2.7 billion (S$3.5 billion), with a pledge to invest in the region’s best firms. 

But in 2025, between the country’s faltering outlook and a scandal that sank a flagship investment, its founders struggled to continue. By June, it sold key funds to US investment firm Ares Management for just US$6 million, according to documents seen by Bloomberg News and people familiar with the matter.

As global investors gathered in Singapore for conferences and annual general meetings in September, Northstar was raised as an exemplar of Asia’s steep challenges.

At a time when private equity players in the region should be thriving amid the perceived decline of US exceptionalism, they are instead weathering one of the harshest capital winters in recent memory as investors remain on the sidelines – India and Japan standing out as rare exceptions.

During the opening panel of SuperReturn Asia’s second main conference day, the moderator asked attendees at the Marina Bay Sands convention centre to raise their hands if they had made fresh commitments to new funds or companies in the last 12 to 24 months or if they planned to do so within the same timeframe ahead: a solitary arm went up for both.

“There is not a lot of private capital. We all know, based on that show of hands, that fund raising last year was 10 per cent of what it was in 2021,” Mr Gunther Hamm, president of China-focused Hopu Investment Management, said on stage. “Structurally, valuations are going to be low and they’re going to stay low.”  

Reluctant investors

RAG-Stiftung, a Germany-based endowment with €17 billion (S$25.6 billion) of fund assets and equity exposure, stands out as an exception. It is investing more money into Asia against the backdrop of concerns about the US.

The firm plans to commit more than US$150 million to private equities through a segregated account in the region in the next four years, said Mr Jan Christoph Gertenbach, its deputy head of asset management.

But for most limited partners (LPs) – pension funds, sovereign wealth funds and family offices – 2025 has brought a confluence of challenges. Economic uncertainty from tariffs and trade wars heightened liquidity needs, just four years after private equity’s fund-raising peak. Promised returns have stalled, leaving paper profits trapped in frozen deals.

This means that until investors can unlock some capital, they are reluctant to back new funds. According to a Bain & Co report issued in June, there is about US$3 of demand for capital from PE firms – or private equity firms – for every US$1 of supply. 

Nowhere has this trend been worse than in Asia. Mr Hyun You-ha, principal at Munich-based allocator Perpetual Investors, said that having looked at the data, his firm was unsure if PEs across the region had delivered on key metrics. These include internal rate of return or distributed to paid-in capital – which measures how much cash an investor receives back.

This comes at a time when Asia should be thriving. South-east Asian nations stand to gain from the manufacturing shift away from China, which itself is seeing a long-awaited rebound – rising share prices, renewed listings, and a 41 per cent surge in the CSI 300 over the past 12 months. Hong Kong share sales have also hit a four-year high. Kotak Mahindra Capital expected Indian companies to raise more than US$30 billion in the year starting July.

“It’s one of our frustrations, because to us, it’s so logical that you would try and diversify into a market that’s growing and probably the future,” said North-East Family Office senior adviser Sam Robinson, calling the fund-raising market one of the worst he has seen since the global financial crisis.

“Most firms should exit at a 30 to 40 per cent premium to their last net asset value, but now, we’re not really seeing that and we’re just glad if it’s a little bit of a premium.”

Part of the problem is that many of the Hong Kong share sales are merely offerings from existing firms, rather than fresh listings. Speaking to a near-empty China-focused session at DealStreetAsia’s PE-VC Summit in Singapore, Trustar Capital managing partner Boon Chew was bleakly honest about the firm’s dollar-denominated fifth China buyout fund.

“We’re one of the few groups that have been foolish enough to be fund-raising a China fund over the last two years,” he said. “We will do a final close soon at about US$1.3 billion and most people say ‘oh that’s fantastic’, but it’s a significant step down from our Fund IV.”

In India, a surge in public markets has inflated founder and investor expectations, slowing investment flow. Deals that should have been eight to 10 times enterprise value to earnings before interest, taxes, depreciation and amortisation are now 10 to 12 times, said Mr Shaun Khubchandani, the co-head of emerging markets at Siguler Guff.

All Asian markets – except Japan, Australia and New Zealand – saw double-digit declines in deal value during the first half of 2025 from a year earlier, according to Bain & Co. South-east Asia was hit hardest, with a 35 per cent drop. 

Looking ahead

Private equity firms have been echoing what LPs want to hear, highlighting asset sales, regional reach and a focus on buyouts over minority stakes. Deal volume could pick up in the second half, which in turn should accelerate funding from 2026, Bain & Co senior partner Kiki Yang said. 

Asset allocators are growing more assertive in defining their expectations. Dietrich Foundation chief executive Edward Grefenstette has warned fund managers against prematurely offloading quality firms just to raise cash.

Meanwhile, Singapore’s sovereign wealth fund GIC is urging its funds to establish “exit committees” focused on timing deal and fund exits.

“In the past, we would expect 15 to 20 per cent of the market value of a set of funds distributed every year,” said Mr Ankur Meattle, GIC’s head of Asia private equity funds and co-investments. “That has come down across the board and that’s what we need to bring back some focus to.”

Some are still trying to push through. BlueFive Capital founder Hazem Ben-Gacem said he is hunting for good companies regardless. 

“I’ll spend as much time in Beijing to look for new deals as I will in Austin, in Seattle and in LA,” he said. “Investors will have to make up their mind if this is a platform they’re comfortable with.” BLOOMBERG