As public market volatility continues to rise, investors are increasingly turning their attention to private markets for diversification and higher returns. 

This backdrop prompts our moderator, Hugh Chung, Chief Investment Officer, to ask our speakers at the Endowus Investment Summit 2025 in Hong Kong, the following questions: How can investors identify outstanding general partners to invest with? While concerns about recession loom big, what would happen to the different private markets strategies in a Global Financial Crisis-type (GFC) environment? Lastly, Partners Group shared their lessons learnt from building their successful evergreen strategies.

Identifying outstanding private markets strategies

Question: How can investors distinguish between good and below-average private equity funds?

Joe Ma, Carlyle AlpInvest: I handle most of the general partners (GPs), and our main challenge is distinguishing between high-quality and lower-quality GPs. It can be difficult to differentiate because everyone seems to do that well. However, during market volatility, it becomes clear which GPs are good and which ones are not. 

During market dislocations, good GPs are able to add value to their portfolio companies. The key question is how they achieve this. One approach is to recognise when it is an opportunity to exit and pursue a buy-and-build strategy at a lower valuation. This involves reducing the valuation, which is the first step. The second step is to pivot the portfolio company towards a higher-growth sector. For example, if the company is in the traditional auto OEM sector, it can be repositioned to focus on EV-oriented end sales. The third step is to upgrade the technology stack and management team of the portfolio companies.

Understanding the history of GPs is crucial. During good times, almost every GP appears similar, with returns around 20%, which is considered good. During difficult times, the performance of lower-quality GPs deteriorates, while the performance of above-par GPs either remains stable at a high level with their internal rate of return, or continues to compound at a very good level. In the past three years, it has become easier for us to identify the bad GPs, as they tend to reveal themselves.

Vicky Yick, Partners Group: It is really when there's market dislocation where you can distinguish between who a good private equity manager is and who a mediocre manager is. 

Throughout COVID-19, we continue with our disciplined hands-on value creation. For example, we have taken the time during the pandemic to diversify the supply chain management and also to not rely on a single supplier. Because of that, we are now pretty comfortable in terms of a lot of the portfolio companies that we are invested in, they're not too much impacted by the increase in tariffs. 

While this is one of the examples, I will use a quote from Warren Buffett to conclude: “Only when the tide goes out do you discover who’s been swimming naked.” This is something that resonates with all the managers investing in secondaries.

Neil Johnson, Macquarie Asset Management: It comes down to how you manage your portfolio, to the risk mandate you have. Infrastructure is part of the diversified portfolio. We're not competing with private equity returns. We are there to deliver a lower risk, lower return to clients. 

Good managers are the ones who stick to the mandate that they have agreed with the client. At Macquarie, when any deal crosses the desk, we focus on what the right pool of capital is for this, given the risk profile of the asset, and just to build upon the question around the economic times. Again, infrastructure is that lower-risk, lower-return proposition, which should ride through economic cycles with less volatility and low beta by definition. 

We spoke about COVID, and one of the best investments we've made in Asia, and one of the largest exits last year, was the AirTrunk deal. That was a business that we grew substantially through our holding period, in control of the shareholder, and almost all of the core growth in that business occurred during COVID. And generally, when we look across the portfolio, the volatility of valuations in our portfolio throughout COVID was relatively rooted, certainly relative to other alternatives. 

Richard Chan, Brookfield Oaktree Wealth Solutions: If you only have a few minutes to choose, go for history. Because there are young managers, there are old managers. The old ones must have gone through different tests. Going through crises shows a lot, because for the firm to be able to survive and navigate those, especially amongst credit, where a loss can be catastrophic, and you don't have a 2x or 3x investment to make up for losses in credit. Therefore, history and experience are very important. 

A natural extension is to also look beyond just the credit selection capabilities to see what other tools they have. For example, at Oaktree, we do not just invest in private credit, and we have a very vibrant, liquid credit investment team and a distressed debt investment team. During crises, we have all these different tools, different experts that we can speak to. 

The resilience of private markets in a crisis

Question: What happens to the asset class in a global financial crisis-type (GFC) environment?

Vicky Yick, Partners Group: The benefit of private equity, in general, is that it tends to outperform public equities. One of the reasons is that, because of the hands-on value creation and the control we have over an investee company, we are able to work very closely with the management and create plans to navigate long-term. We don't have to worry about the quarterly reporting of earnings. It helps us make the company a lot more resilient. So pretty sure, when a crisis comes, we'll be able to withstand a lot of the different difficulties. 

Neil Johnson, Macquarie Asset Management: Infrastructure is at the lower risk, lower return on the spectrum. So, if the GFC is to recur, it would have a lower impact on our portfolio than other areas of alternatives. One of the benefits of infrastructure is that most of the assets we invest in regenerates strong cash yields, as investors are protected by baseline contracts and continue to get dividends throughout that difficult period. 

Joe Ma, Carlyle AlpInvest: Reflecting on the history of our funds, those that invested before the GFC were actually resilient, which can be attributed to the focus on quality and middle-market funds. Looking ahead, liquidity is a key consideration over the next 12 to 18 months. It is anticipated that liquidity will be challenging in large-cap funds, as most exits are driven by initial public offerings (IPOs), which are expected to face significant difficulties this year, with hopes for improvement in the following year. To compare, when investing in middle-market funds, there are more exit venues and liquidity options available. The middle-market private companies have greater room to grow their market share. 

Richard Chan, Brookfield Oaktree Wealth Solutions: Those who are old enough during that time that you had a credit card during a GFC, would you pay credit card debt that you had? I'm guessing most of you would say the answer is yes, and that is the same analogy with private credit because credit is protected by contractual obligations, making it the safest on the capital stack. 

Lessons from Partners Group on running successful evergreen strategies

Question: Partners Group has been the pioneer of evergreen. What lessons can be learned from your successful evergreen strategies?

Vicky Yick, Partners Group: We have gone through market cycles and never had to gate our investors, so sharing some of the lessons that we have learned before. 

Firstly, it is crucial to have access to both direct investments and secondary investments for the evergreen platform to be sustainable. By having direct investments, your portfolio manager can have full visibility of the types of investments coming in, enabling better cash flow management. However, relying solely on direct investments may not be sufficient to fully deploy the incoming cash flow on a monthly basis. Utilising secondary investments ensures consistent deployment and helps maintain investment levels.

The second lesson is about fair allocation. All our evergreen investors have equal access to every investment on the Partners Group platform. They invest alongside our institutional investors in both our closed-ended fund and our bespoke solution. There is no cherry-picking, which ensures that our evergreen fund can keep up with, or even outperform, our closed-ended funds.

The third lesson is the importance of discipline when growing your fund. Growing the fund too quickly may result in the dilution of existing investors' interests and over-allocation to certain investment vintages. It is important to have a diversified portfolio with assets at different stages of value creation, including those at the beginning, middle, and exit stages. This allows for a steady cash flow that can be used for new investments and to meet redemption requests.

Lastly, it is crucial to have a capable portfolio investment team to manage your portfolio. Many people expect to see a senior portfolio manager solely responsible for managing the private evergreen funds. In Partners Group, we have a dedicated team of over 30 individuals managing the portfolio. Their responsibilities go beyond balancing cash flow and foreign exchange. They also perform stress testing and risk management, considering factors such as subscriptions, redemptions, underlying funds, capital calls, and cash distributions. Managing evergreen funds is a complex task that requires a comprehensive approach.

By incorporating these lessons, your evergreen portfolio will have a greater chance of being sustainable.

Explore alternative strategies with Endowus

Making access to private and illiquid assets easier for individual investors has, and will continue to be, an important part of the mission of Endowus to focus on the three building blocks of investment success — access, advice, and cost.

On access, a wider suite of investment products, including private credit, private equity, and hedge funds, is accessible at your fingertips. Endowus also keeps fund-level fees as low as possible and makes exclusive access to alternative strategies at lower minimums. 

We can cater to your needs — be it through bespoke portfolio construction to cater to various goals and life priorities, or being able to invest in more investment products, many of which are only available to Accredited Investors. 

A simple verification is all you need to access world-class private markets and hedge fund strategies on Endowus.

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