After the pandemic-induced global fundraising slump, GPs are once again facing a similar challenge – LPs are reducing their allocations to less liquid asset classes (such as private equity) due to the “denominator effect” from the public markets, which have corrected significantly this past year.
DealStreet Asia spoke with Quantium’s Client Solutions Principal, Ee Fai Kam, as well as other experts in the private markets space to get a deeper understanding of this trend and how it was impacting fundraising in Southeast Asia.
One of the key areas that have been affected is the rigour of the investor due diligence process. “LPs have…started to take a more serious approach in their due diligence, especially after blow-ups such as the crypto exchange FTX and payment processor Wirecard earlier,” said Kam.
With LPs still wary of the current market landscape, they tend to err on the side of caution and preserve more liquidity to hedge in case a recession hits later on, he added.