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https://www.avcj.com/avcj/news/3029078/aquilius-closes-debut-asia-secondaries-fund-on-usd400m

Aquilius Investment Partners, a real estate secondaries investor, is tracking significant, opportunistic private equity deal flow in the current exit malaise. Diversification is the theme of the maiden fund

When Singapore’s Aquilius Investment Partners set up shop in 2021, the founders wanted to address what they saw as a fundamental lack of dedicated secondary capital in Asia. It is perhaps telling that the firm didn’t finish raising its debut fund until that year’s investment boom had ended and the ensuing exit slowdown had come into focus.

The fund closed this month with USO 400m in commitments from a mix of sovereign wealth funds, endowments, and family offices. Aquilius declined to specify how long the fund was in the market but described it as a rapid fundraise driven by strong demand.

The founders’ credentials offered some comfort to LPs. Aquilius was established by Bastian Wolff, a 15-year veteran of Partners Group, and Christian Keiber, who spent nine years at The Blackstone Group. Wolff served as Partners Group’s head of private real estate in Asia, while Keiber was a managing director covering Southeast Asia and Australia private equity for Blackstone.

Part of the pitch to investors was Asian exposure uncoupled to a specific market or strategy. Keiber describes real estate as the preferred asset class but Aquilius is tracking significant deal flow in private equity, which is expected to represent about 20% of the portfolio.

“You always have investors who prefer certain geographies or asset classes over others, but this is exactly the beauty of this product- that we very consciously focus on diversification,” Keiber said, when asked if LPs had specified that they wanted to avoid China exposure.

“We want to make sure that the portfolio we construct doesn’t depend on a particular sector or a particular geography. If you have a long-term positive view on the region, this is a product that will resonate very well with you.”

Deal flow to date is said to span the gamut of transaction types, from traditional LP fund positions to GP-led and direct secondaries. Preferred equity or net asset value (NAV) financing arrangements – seen as effective in solving specific liquidity problems with upside potential and a minimal upfront haircut- are also part of the offering.

Wolff observes that GP-led deal flow is growing given the difficult exit environment, including complex fund recapitalisations, joint venture recaps, and continuation vehicles. But this is not outpacing traditional transactions. He estimates up to 70% of activity since the start of the year has been LP-led, driven by investors altering regional allocations and addressing the denominator effect.

“What’s probably more relevant today is this home bias, where investors are just shifting to what they’re more familiar with, what they feel is safe, and where they’re reallocating away from stuff that’s very far away from them,” Wolff said, flagging deal drivers such as personnel changes, regulatory changes, timing constraints, asset fatigue, and a desire to shore up balance sheets.

“Pinpointing one or the other is challenging, but we have observed that there is an increasing volume of LP-leds since the second half of last year, and specifically into 2023.”

• Aquilius Investment Partners is announcing the final close of its maiden AIP Secondary Fund I at over US$400 million of client commitments.
• The fund targets investments in secondaries transactions across the Asia Pacific, with the aim of building broadly diversified asset portfolios at attractive risk-return profiles.
• Founded by long-time Asia industry veterans Bastian Wolff and Christian Keiber, Aquilius seeks to capitalize on the fast growing and largely untapped Asian secondaries market.

Singapore, 19 April 2023 — Aquilius Investment Partners (“Aquilius” or the “Firm”), a Singapore based investment manager focused on secondaries in the Asia Pacific region, has announced the final closing of its maiden AIP Secondary Fund I, LP. (“AIP SF I”), at over US$400 million in client commitments. Alongside these commitments, the Firm has raised an additional US$200m of managed accounts available for co-investments from its investors. AIP SF I’s limited partners include global institutional investors such as sovereign wealth funds, endowments, and family offices.

Christian Keiber, Founding Partner, said: “We have seen strong institutional demand for our dedicated Asia secondaries strategy and are grateful for the trust that our clients have placed in us with the closing of our maiden fund. As investment managers, we seek to provide our clients with a differentiated, lower-risk access to Asia’s private markets and we are excited by the market opportunity, which continues to grow rapidly across both traditional LP secondaries and more complex GP-led secondaries transactions.”

Through AIP SF I, Aquilius is targeting investments in traditional and non-traditional secondaries transactions across the fast-growing and largely untapped Asia Pacific region. To date, the fund has made existing investments across a comprehensive set of secondary solutions ranging from the acquisition of limited partnership interests to recapitalization of closed-ended funds and joint ventures, and seeks to capitalize on the liquidity needs across Asia’s private markets landscape.

Bastian Wolff, Founding Partner, said: “We created Aquilius to provide custom-tailored liquidity solutions for both Limited and General Partners across their private market investments in the region. We are seeing an increasing need for our product, driven by a slow-down in overall exit activity, a significant tail of unrealized NAV across older fund vintages, and a changing regulatory environment. Our approach is focused on solving investors’ headaches through flexible, patient, and solutions-oriented capital and our deep local experience and network position us well to do so.”

ABOUT AQUILIUS INVESTMENT PARTNERS

Founded by Bastian Wolff and Christian Keiber, Aquilius is a specialized provider of secondaries solutions in the Asia Pacific region. Headquartered in Singapore, Aquilius’ platform is designed to serve the entirety of the Asian secondaries market, with capabilities spanning across LP fund transfers, GP-led transactions, and secondary direct transactions. Aquilius’ team consists of senior professionals with long tenures in investment management at leading global private markets organizations and have executed over US$2 billion of transactions through market cycles.

MEDIA CONTACT
PRecious Communications
Email: aquilius@preciouscomms.com
Tel: +65 6303 0567

https://www.asiaasset.com/post/26789-aip-0116

Private capital markets have exhibited unprecedented growth over the last decade. Market participants who invested in long-duration private markets vehicles are now increasingly looking at secondaries to raise liquidity in uncertain times. Asia-Pacific in particular is emerging as a significant market for these types of transactions.

Once considered a nascent part of the industry, the Asian secondaries market has flourished, with volumes rising 13-fold in merely a decade to over US$7 billion in transactions in 2021, according to data provided by Greenhill. Traditionally, secondaries involved the acquisition of a single closed-ended fund interest or a portfolio of fund interests, providing an exit avenue to investors prior to the natural maturity of these vehicles or their underlying assets.

In recent years though, secondaries have evolved considerably, with managers of private vehicles increasingly looking at alternative liquidity solutions for their limited partners through so-called non-traditional secondaries transactions, such as fund recapitalizations or continuation vehicles.

“The rapid growth of secondaries has spurred interest and adoption by limited partners and fund managers, who can proactively manage portfolio liquidity through these instruments,” said Bastian Wolff, co-founder of Aquilius Investment Partners. “At the same time, it has attracted a number of global asset managers to grow this line of business significantly, primarily in their home markets in North America and Europe.”

The Asian opportunity

But whereas the secondaries markets in the Western hemisphere have evolved considerably over the years to become heavily standardized through efficient auction processes, the Asia-Pacific region remains largely untapped and disintermediated with very limited dedicated capital.

“In this region, the vast majority of deals happen off-market and discreetly, and they are not being captured by the broader transaction data recorded by intermediaries,” said Wolff. “That leaves a tremendous amount of opportunity for managers with a strong on-the-ground presence, deep local relationships, and extensive operational expertise.”

Aquilius recently launched a dedicated secondaries strategy across real estate and private equity that is exclusively focused on the Asia-Pacific market. The firm was established by Wolff and Christian Keiber, industry veterans with decades of experience in the region and previous stints with Blackstone and Partners Group.

“Liquidity is on everyone’s mind, particularly here in Asia where value creation tends to take longer as compared to more mature markets and can often stretch beyond the initial fund life,” said Keiber. “We are supporting LPs and GPs with a broad range of secondaries solutions, such as rebalancing of LP’s private market portfolios, helping sponsors to recapitalize older vintage funds and asset joint ventures, as well as executing continuation vehicles with existing managers.”

Providing differentiated access

From an investor’s perspective, the secondaries market has offered attractive risk-adjusted returns over the last 20 years as compared to most other private markets asset classes. This is driven by the inherent benefits of secondaries, which include a high level of pre-specification from the acquisition of mature portfolios that are deep into their value creation plans, an accelerated return of capital, and broad diversification across geographies, sectors, asset classes, and investment vintages.

When it comes to the complex and resource-intensive region that is Asia, many investors struggle and lack conviction which specific fund, sector, or strategy to commit to, and therefore often look for diversified strategies rather than concentrated commitments.

“We purposefully created Aquilius to provide investors with a differentiated access to Asia’s private markets. Our dedicated secondaries strategy allows our clients to participate in the growth of the region through broadly diversified portfolios at attractive risk profiles.” Keiber said.

The current macroeconomic uncertainties provide a particularly interesting time for secondaries investors. Many LPs are looking to shore up liquidity, but the environment for exits has become more and more difficult. The recent rout in public equities and bond portfolios further urges investors to bolster their balance sheets, creating a growing supply of unsold private markets inventory.

“Here in Asia, we are seeing an increasing number of inbounds from offshore LPs reallocating capital back into their home markets, looking for expedient and certain solutions. At the same time, we are proactively working with regional GPs to help them navigate a wall of upcoming fund maturities that need to be resolved” Wolff said.

These market dynamics, combined with strong tailwinds from record private capital fund raising and increasing product adoption in the region, are expected to make the Asian secondaries market a compelling investment theme for 2023 and beyond.