Asia Private Equity: Three Key Trends Revisited

In April 2025, Morrison Foerster private equity partner Scott Jalowayski joined Carmen Wright on RTHK Radio 3's The Close to discuss the outlook for private equity in Asia.

At the time, markets were grappling with uncertainty around interest rates, inflation, geopolitics and the prospects for private equity exits.

Revisiting the discussion nearly 18 months later, three themes stand out. While markets rarely move in a straight line, developments since then have reinforced several of the underlying trends covered in the interview.

1. Higher-for-longer interest rates and the premium on predictability.

During the April 2025 interview, Scott questioned the prevailing assumption that interest rates were inevitably headed lower and inflation was largely under control.

Eighteen months later, the bond market tells an interesting story.

The yield on the benchmark U.S. 10-year Treasury has risen from approximately 4.5% in April 2025 to 5.2% in October 2026—an increase of roughly 70 basis points.

Meanwhile, the Federal Reserve reduced its benchmark policy rate during 2025, only to reverse course and raise rates by 25 basis points in September 2026.

In other words, even as the Fed initially eased monetary policy, longer-term borrowing costs increased, and the direction of monetary policy became less predictable.

For private equity investors, these developments have significant implications. Higher financing costs affect acquisition valuations, leverage, investment returns and the ability to exit portfolio companies at attractive prices.

A broader point raised in April 2025 concerned predictability. As Scott observed during the interview, "It doesn't really matter what the rules are, as long as there are rules."

Investors can price risk. What is considerably harder to price is uncertainty.

2. The growing importance of developed Asian markets—particularly Japan.

Another theme was the changing risk-reward calculus for institutional investors allocating capital across Asia.

Historically, investing in developing economies involved accepting greater risk in exchange for the prospect of higher returns. But when valuations converge across markets without a corresponding convergence in risk, that proposition becomes less compelling.

Japan's private equity market provides a striking illustration of how investment activity has evolved.

According to Mergermarket data:

• Japan's annual private equity buyout transaction value increased from approximately $7 billion in 2020 to $31 billion in 2025.
• Over the same period, China's declined from approximately $22 billion to $9 billion.
• Among Japan, China and Southeast Asia, Japan's share of aggregate transaction value increased from approximately 24% to 72%.

Japan also recorded 97 buyout transactions in 2025, compared with 25 in China and 24 across Southeast Asia.

These figures illustrate the growing relative importance of Japan within Asian private equity. Corporate governance reforms, business succession opportunities, corporate carve-outs and a comparatively predictable investment environment have helped reinforce its attractiveness.

The fundamental question for institutional investors is increasingly not simply where they can achieve growth, but where they can achieve the most compelling risk-adjusted returns.

3. Secondaries and continuation vehicles have become mainstream tools for returning capital.

A particularly consequential theme was the growing importance of liquidity in private equity.

Scott emphasized that what ultimately matters to institutional investors is DPI—distributions to paid-in capital. Put simply, investors want their capital returned, together with an attractive return.

Traditional exits through strategic sales and IPOs remain important. But investors increasingly need a broader range of options.

That is where secondaries and GP-led continuation vehicles have become particularly relevant.

According to Jefferies, global secondary transaction volume reached a record $240 billion in 2025, an increase of approximately 48% over 2024. GP-led transactions accounted for approximately $115 billion, growing by more than 50% year-over-year.

These are no longer niche solutions. They have become established mechanisms for generating liquidity, managing portfolio duration and allowing sponsors to retain attractive investments while providing existing investors with an opportunity to realize value.

As Scott observed during the interview, investors want a "panoply of exit options."

The common thread: Capital needs both confidence and a path home.

Whether considering macroeconomic uncertainty, geographic allocation or alternative exit structures, the fundamental priorities of institutional investors remain remarkably consistent.

Predictability. Appropriate compensation for risk. And, ultimately, the return of capital.

These were central themes in the April 2025 interview. Eighteen months later, they remain central to the evolution of private equity markets across Asia and globally.

Listen to the original RTHK Radio 3 interview.