Welcome Address by Mr Tharman Shanmugaratnam, Deputy Prime Minister of Singapore; Minister of Finance, Chairman, Monetary Authority of Singapore, at Blackstone Singapore Office Opening Event on 21 October 2013
Mr Steven Schwarzman, Chairman and CEO, the Blackstone Group,
Ladies and Gentlemen,
1. I am very happy to join you in marking the opening of Blackstone’s Singapore office. I understand that Singapore is your new regional hub for Private Equity and Real Estate investments across Asia and Australia, and houses its only treasury function outside New York. This reflects Blackstone’s strong interest in o Asia’s future growth.
Rising Prominence Of Private Equity As An Asset Class
2. The continued low-yield environment pressures asset allocators to seek alpha away from traditional sources. We are seeing the ‘mainstreaming’ of alternative investments with sophisticated institutional investors.
3. Private Equity has been recognized as a more established asset class in recent years. The global PE industry hit a record high of US$3.3trillion of assets under management last year1, recording an annual growth rate of 8%. Whilst encouraging, this is slower than the average annual growth of 10% over the last 5 years. As the economic outlook remains uncertain, investors are more cautious in committing capital2. Like all other asset classes, Private Equity has not been spared from the global slowdown.
4. The global economy still faces a high degree of uncertainty and divergent possibilities. Both the US and Europe continues to perform below potential. If global policy makers do not respond adequately to current cyclical challenges, these may lead to structural problems in the long run. As a truly integrated global economy, what happens in the mature economies will have real repercussions on the emerging markets. As it is, many emerging economies have seen volatility in its markets recently, on the back of uncertainty over US’ plans to unwind its quantitative easing programme.
Private Equity In Asia
5. Blackstone’s decision to expand its Asian footprint signifies continued investors’ interest in the potential of Asia. The emerging market economies, particularly in Asia, will remain key contributors to global economic growth over the next five to ten years. Growth in emerging Asia will be supported by continued urbanization, favourable demographics and an increase in investment and intra-Asian trade. As such, it is no surprise that investor interest in Asia remain strong. Asian-focused funds currently account for the largest proportion of private equity funds looking to raise capital globally3. Asian-focussed buyout funds have also raised more funds this year than last year4. Many investors investing into Asia now look beyond investing in a particular country, and are opting for a diversified exposure5.
Private Equity In Singapore
6. In Singapore, we have seen good growth in the private equity and venture capital sector. A recent survey conducted by the Singapore Private Equity and Venture Capital Association (SVCA) reported that assets under management of the sector has grown by 20% to $32 billion last year. New players like Blackstone are welcomed additions to Singapore.
7. Beyond achieving investment returns for its investors, private equity players can make a real and positive economic impact and contribute meaningfully to Asia’s growth. Private equity investors provide their portfolio companies with not only capital, but more importantly, operational and business expertise. Such expertise will drive up operational efficiencies for the firm, as well as open new markets for the firms’ products and services.
8. In conclusion, the private equity industry in Asia has matured over the last decade, and it has become a mainstay in Asia’s financing landscape. The Blackstone office in Singapore is testament to Blackstone’s long term commitment to Asia. . I congratulate you on the opening of your Singapore office and look forward to a long and fruitful partnership with you in Singapore.
1 Source: Preqin
2 Preqin reports that the average time funds spent on the road was 17.1 months in 2012 up from 16.2 months in 2011.
3 Asian-focused funds account for the largest proportion (34%). This is more than the 28% and 27% of funds earmarked for investments into North America and Europe respectively.
4 Six Asia-focused buyout funds have raisied an aggregate US$10.3 billion in 2013. Already this significantly surpasses the US$6.9 billion raised by the 12 Asia-focused buyout vehicles in all of 2012. The average size of Asia-focused private equity funds has also increased from $256mn in 2012 to $422mn for funds closed in 2013 so far.
5 Pan-Asian funds have raised US$14.5 billion up in 2012 from US$8 billion the previous year (Source: Asia Private Equity Review)