Asia to account for 37% of global HNWI PE commitments by 2025 - study

Over the same period, HWNI investment in the asset class will rise from USD 493bn to USD 1.17trn, or 11% of the global pool. In 2015, they accounted for USD 190bn, or 8%.

The calculations are based on global alternative assets under management of USD 13.5trn in 2020, of which USD 8trn was in private markets, USD 3.6trn in hedge funds, and USD 1.9trn in crypto. Within private markets, PE accounted for USD 5.3trn, followed by real estate on USD 1trn, private debt on USD 800bn, infrastructure on USD 600bn, and natural resources on USD 200bn.

North America will remain the largest source of HNWI commitments to private equity, though its share will fall from 59% in 2020 to 52% in 2025. Europe will drop from 11% to 9%.

Meanwhile, commitments to private equity by wealth segment will remain largely consistent. In 2025, ultra and upper HNWI – defined as those with financial wealth in excess of USD 20m – will account for 48%. This compares to 40% for lower HNWIs with wealth of USD 1-20m and 12% for the sub-USD 1m mass affluent and retail segment.

Global private equity firms are increasing their efforts to raise capital from HNWIs through innovation in terms of product structuring and distribution. Semi-liquid vehicles that address longstanding discomfort with minimum commitment requirements, longer lock-up periods than other asset classes, and incremental capital calls are growing in number.

At the same time, there has been a proliferation of digital platforms that aggregate dozens of smaller fund commitments and automate reporting. Tokenisation is also on the agenda. While supplanting feeders established by private banks as the primary gateway is a commonly stated goal, bringing PE to HNWIs will create alliances and rivalries as financial services and technology collide.

Private equity firms are staffing up in Asia to address this change. KKR’s fourth pan-Asian fund is the largest raised for deployment in the region and the largest raised by KKR globally in terms of number of LPs. This is partly the result of a concerted effort to develop the family office and HNWI constituency – where a lot of relatively small checks can add up to a significant amount.

“Building out our private wealth business has been a key strategic priority for KKR globally, as this client base is underpenetrated, especially for alternatives products. We now have dedicated people in this area, including a head of private wealth in Asia who is building a team to cover private banking channels, ultra HNWIs, and single- and multi-family offices,” Sarah Zhang, a principal in the firm’s client and partner group, recently told AVCJ.

Of the 290 investors in Fund IV, 85 had previously not committed to KKR’s Asian private equity strategy. Half of these were private wealth clients.

In addition to PE firms raising capital directly, wealth managers and technology platforms are also targeting the HNWI segment. The BCG and iCapital study identified five challenges for wealth managers: limited access to high-quality funds, cumbersome and manual paper-based subscriptions, client servicing complexities, disconnects with service providers, and opaque fund reporting.

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• Topics
• Fundraising
• GPs
• Asia
• iCapital Network
• Fundraising
• HNWIs
• KKR