Private markets: why now is the time for Asian investors to allocate 

As we outlined in a recent interview with the Financial Times, we believe private markets show their true strategic value during periods of volatility. Over the last few years, we’ve seen stubborn inflation, higher-for-longer interest rates, and correlations between equities and bonds becoming less stable. Alongside all of this, the recent US tariff announcements only reinforced the need to revisit old assumptions.

Periods of market dislocation highlight the strategic role private markets can play. Yes, valuations are under pressure. But for investors who stay adaptable and focused on the fundamentals, there are ample opportunities for repositioning across private markets and other alternative investment solutions.

Secondaries and co-investments are a good example. Having grown considerably in recent years as exit challenges forced general partners (GPs) to seek out new routes to liquidity, these burgeoning segments have become core tools for managing liquidity, accessing high-quality managers, and improving portfolio construction. What’s more, the same conditions that have led to the growth of these segments are allowing investors to secure access to oversubscribed managers at better terms – our research indicates that investors can currently acquire PE secondaries positions at 8-15% discounts to 2017 prices.¹

Private credit is also seeing a surge in interest. While still only a small slice of Asia’s overall credit market, it’s growing rapidly. With floating rates and lower mark-to-market volatility, private credit – and in particular senior direct lending – offers yield and downside protection, critical characteristics for investors looking to build ‘all-weather’ portfolios.

As with investing in alternative investments of any type, asset owners ought to consider their own specific circumstances. Part of the enhanced returns that private markets and alternatives can offer arise from their illiquidity premium, but investors need to ensure that any investment aligns with their own liquidity requirements. 

The right partners can assess your needs and advise on which alternative investment solutions fit best with your portfolio’s needs. Some will be able to make long-term allocations to illiquid asset classes, but others will need a more flexible solution. For these investors, options such as a semi-liquid vehicle may be more appropriate.

It’s also critical to work with partners that have deep insight into the solutions on offer. Data on alternative investment solutions can be difficult to source, making it difficult to map performance, risk and exposure across different investments. This is a key driver behind our recently announced collaboration with S&P and Cambridge Associates to build a private markets data solution.

My advice to clients is not to try to time private markets, but to trust your long-term strategy. If you’ve already committed capital, stay the course. Slow the pace if needed, but pulling out completely risks undermining your strategy and doing a disservice to your end investors if future potential returns are missed. 

In Asia, as across all of our international operations, our approach is grounded in local execution backed by global insight. What works for a Singaporean sovereign fund might not work for a Japanese corporate pension fund. We have teams on the ground in both markets who understand those nuances and can tailor their strategies accordingly.

Our recent OCIO strategic partnership with Mizuho in Japan is one example of how we work with local partners to bring institutional-quality solutions to clients. We help them solve problems, expand their investment capabilities, and deliver outcomes that fit their long-term goals.

This local-global model is increasingly important in a time of heightened geopolitical tensions, where clients need partners who understand the macro picture but can also deliver at a market level. That’s where we come in.

At Mercer, we’ve evolved from being a pure research and advisory-led firm into a full-spectrum global investment partner. We still operate with open architecture – meaning we’re not tied to any in-house funds – and we’ve expanded our implementation capabilities globally. With over $17.5 trillion in assets under advice and $613 billion in assets under management globally, we can combine global reach and access to managers with flexible implementation and robust governance.

But what really sets us apart is how we work with clients. We’re not trying to be just another asset manager. Our consulting heritage means we act as a true partner - sitting on the same side of the table as our clients. We co-design solutions, using external managers and our global research platform to help clients build more agile portfolios that suit their specific investment and governance needs.

This is not a moment to step back. It’s a chance to build stronger, more adaptive portfolios with a partner that understands both the global context and your specific needs. That’s what we do at Mercer, as a partner to our client’s portfolios. 

 ¹ Jefferies 2024 Market Update 

See our Important notices