The surging demand for alternatives in Asia is unlocking substantial opportunities for private banks and global private equity houses.
In Herbert Suen’s view, Blackstone’s track record and expertise in Asia puts it ahead of its peers in the race to grab them.
“Blackstone was among the first to pave the way for alternatives in the private wealth space. We started our Private Wealth Solutions (PWS) business in the US more than a decade ago and have been building out the team in Asia since 2013,” Suen, the head of APAC of Blackstone PWS, told Asian Private Banker.
Suen said the PWS business has grown meaningfully in Asia, especially since 2019. He declined to disclose its AUM in the region, but said globally PWS retail AUM have grown from US$10 billion in 2007 to US$233 billion in 2Q22, meaning that Blackstone’s wealth business makes up a quarter of the group’s total AUM of $941 billion. Blackstone PWS Asia has over 20 distribution partners in the region.
“Investors entrust us as a steward of their capital,” he asserted. “And we don’t take that lightly – we offer a spectrum of end-to-end services – from product design and structuring, investor education, and training, to aftersales on-the-ground support and services.”
Alternative investments is a relatively new asset class for many UHNW investors in the region. Suen believes educating clients and PWS’ distribution partners is a critically important, long-term initiative, “so that the advisors and their clients can understand what we do and feel comfortable about their investments”.
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Blackstone PWS started in Asia by only offering traditional illiquid types of structures, but has now added a suite of perpetual semi-liquid offerings for individual investors.
“We are at the forefront of redefining the space for alternatives in private wealth,” Suen said. The firm developed a global opportunistic strategy – its Core+ real estate strategy – in 2017. It is a semi-liquid offering designed so that individual investors have access to the same quality of real estate investing capabilities as institutions.
“Our Core+ real estate strategy was designed with income and liquidity in mind. It’s concentrated in high-quality, income-generating, stabilised assets in some of our high conviction sectors including logistics and rental housing. In our view, these sectors have strong fundamentals and demonstrated growth even in times of market volatility like we’re seeing today,” he explained.
While semi-liquid is a new structure in private markets, Suen believes investors should have a clear proposition when it comes to doing something new in a different structure. He added that if investors are not constantly looking for liquidity, then they should start to increase their allocations to the traditional private market.
More private banks in the region have been eyeing the opportunities in VC investing or pre-IPO deals, a trend that Asian clients are favouring at the moment. But in Suen’s words, Blackstone doesn’t “like to chase after what’s popular or what’s hot out there”.
“We need to deliver very solid and consistent returns to our clients. What we are offering right now are really things that have been working for a long period of time and we have very deep expertise.”
Large scale brings the best deals
As private market investment gains strong traction among UHNWIs in Asia, more PE firms such as Apollo Global Management and Brookfield Oaktree Wealth Solutions have been bolstering their wealth teams in the region.
“We welcome competition,” Suen said, and in the end, investors will benefit with more choices in the market. “And how do we differentiate ourselves? We just continue to lead by example and set the standard because that’s how we started the whole trend.”
A key Blackstone PWS advantage, according to Suen, is the scale of the firm. “A large scale of fund size ultimately brings a few things to the table. First, we can do much bigger deals, and we find those deals tend to have less competitors coming after the same deals, so that will potentially bring better pricing”. Blackstone’s real estate strategy is now closer to a net asset value of US$70 billion.
He added that the portfolios the firm manages are relatively larger and more diversified than those in the rest of the market: “We believe this gives advisors and investors comfort especially when they need to allocate a meaningful amount of capital. With scale we also tend to have more options on financing and liquidity management, we run our portfolios and manage the underlying assets with high efficiency.”
Blackstone PWS Asia has a team of 35 in the region, and Suen said the firm will continue to add people where appropriate.
“We’ve grown quite a bit since I joined in 2016. It was a three-person team. The growth really started in 2020, when the market was taking a pause during COVID. But we knew exactly what we were doing and the vision was very clear, so we started hiring pretty aggressively in 2020,” he said.
Suen said the firm is looking at a few interesting markets as part of onshore expansion. “As an industry leader, we just have to continue to drive forward to look at different things, different opportunities, different structures in the region and beyond. China is definitely enormous when it comes to wealth management, just like Japan is another big one in the region. So with these two markets, we are definitely watching very closely.”