Manulife Financial is planning to double its exposure to private equity in Asia by 2024 in line with the broader boom in the regional asset class.

At present, the Canadian insurer has about $10 billion invested globally in private equity and a fifth of that is in Asia, according to Liam Coppinger, a managing director at Manulife Capital, which invests on behalf of its parent.

"But it’s the fastest growing region and we expect that to probably double within the next four or five years,” he told the audience at the HKVCA Asia Private Equity Forum on Wednesday.

On a net basis, Manulife Capital is 75% invested in private equity funds and 25% in co-investments. Co-investments will continue to be a larger share of the portfolio, said Coppinger, who leads the group's private equity programme in Asia.

“I think the way to grow is just to continue what we are doing, like typically adding new GPs [general partners], scaling up [to] larger commitments, writing larger tickets,” told AsianInvestor on the sidelines of the event.

It will target more GPs in both developed and emerging markets. The new GPs will primarily be country-focused managers, or spin out to first-time funds, he said.

Manulife Capital first started investing in Asia from its Toronto headquarters and pan-Asia GPs were the first building blocks for exposure in the region at that time. However, it has not added to its pan-Asia GPs for the past six years and this will unlikely change going forward, he said.

Manulife Capital, the limited partner (LP) in a private equity fund, is working with 20 GPs in about 35 funds at the moment. The fund is not engaged in any private equity secondaries, which refer to the buying and selling of pre-existing investor commitments to private equity, he said.

Asia appears front and centre for a growing number of private equity investors and the pickup in allocations to private equity already seen among large asset owners is expected to accelerate in 2019 and beyond.

Australia’s Future Fund and the Malaysian Employees' Provident Fund are among those looking to increase their exposure to private markets this year. The Monetary Authority of Singapore also issued a $5 billion mandate to encourage private equity managers.

The trend for greater allocations to private equity is supported by long-term structural trends. JP Morgan Asset Management in Hong Kong said in a report in November that there are growing alpha opportunities in the sector driven by disruptive innovation and geographic expansion.

"Today’s large and accessible private asset markets offer potentially superior returns, subject to illiquidity risk and appropriate manager due diligence," the report said.

CASE FOR CPPIB

While Manulife is shifting its focus towards country-focused managers, the Canada Pension Plan Investment Board (CPPIB) appears to be pursuing something different.

Among the forum panellists also, Leo Chiu, CPPIB's senior principal for private equity Asia, said its aim is to generate scale and return for the fund.

Rather than invest more in bigger funds to drive scale, the Asian private equity portfolio at CPPIB actually has half of its exposure in regional funds and a half in country-focused funds, he said.

The former gives the pension fund more international reach while the local ones have stronger networks on the ground and are more knowledgeable in their own economies, Chiu said.

At present, CPPIB has C$68 billion (US$50.1 billion) of private equity exposure globally and Asia has about 17% of that. It invests across funds in Asia and also has a local team that does co-investments and co-sponsorships with GPs, Chiu said.  

The programme started in the region as significant LPs with various GPs. It then deepened those relationships by collaborating with them in co-investments, including in a passive syndicated manner, and also in co-sponsorships, by underwriting deals along with the GPs in often similar amounts, he said.

For further insight and analysis into how insurers are seeking to invest and navigate regulatory changes, look out for AsianInvestor's 6th Insurance Investment Forum in Hong Kong on March 12, and our inaugural Insurance Investment Forum in Singapore, on March 14. For more information, please click here.