Wealthy investors in Asia-Pacific are expected to step up their investments in private markets over the next three years to bolster returns as a myriad of economic and geopolitical risks hobbled publicly traded assets. Their bets in the sphere are expected to compound at 26 per cent annually through 2025, according to a study published by Boston Consulting Group and fintech company iCapital. That is faster than the 16 per cent forecast for North America and the 13 per cent seen happening in Europe. “Our study underlines the size of the market opportunity for banks and wealth managers who expand access to private market investments for their clients,” said Anna Zakrzewski, managing director and partner at BCG. Tapping into alternative assets “can alleviate the margin pressures they are experiencing today,” she added. Rich investors in Asia-Pacific will account for 37 per cent of the global investment among their peers by 2025, versus 27 per cent in 2020, according to the report. By that year, they will contribute to 10 per cent of capital raised by private equity funds globally, the report said. Assets managed by rich individual investors in the private markets, which typically include equity in private companies, over-the-counter debt instruments and infrastructure and property holdings, are expected to more than double to US$1.2 trillion, it added. In mainland China, there is an increasing number of international alternative managers setting up wholly foreign-owned enterprises (WFOEs) to attract onshore clients, said Nick Xiao, chief executive of Hywin International, part of Nasdaq-listed Hywin Wealth. China’s unicorns tap US$240 billion in private-market funding as they face IPO freeze These WFOEs can register as private fund managers, raise yuan from qualified investors and seek investment quota to invest in offshore alternative markets. “These managers are bringing their investment know-how to China, leveraging their offshore investment capabilities and cross-border connectivity to help [investors allocate capital] into hedge funds or private equity strategies,” he said. Within Asia-Pacific, mainland China accounted for 60 per cent of the total investment in the private equity market by rich investors, according to the BCG and iCapital report. Their investment is expected to grow at a record compound rate of 29 per cent annually over the next three years. Emerging industries such as health care and new energy vehicles (NEVs) have attracted private equity investors, pushing up deals in mainland China since last year. Turned away by Star Market, some of the NEV start-ups have turned to private equity for capital to expand. The wider menu of alternative investment products offers better prospects for mainland Chinese investors to enhance returns according to their risk preferences, said Xiao of Hywin, an independent wealth manager focused on Greater China. The median net internal rate of return for Asia Pacific-focused private equity funds was 12.4 per cent in 2020, according to Bain & Co, a management consultancy. The Hang Seng Index of blue-chip stocks in Hong Kong dropped 3.4 per cent that year.