Liechtenstein royal family-backed banking and asset management firm LGT says private equity has ‘good future’ in China

Liechtenstein royal family-backed banking and asset management firm LGT says private equity has ‘good future’ in China

Liechtenstein royal family-backed banking and asset management firm LGT says private equity has ‘good future’ in China

LGT Group, the world’s largest royal family-owned private banking and asset management group, sees private equity continuing to be attractive to high-net-worth clients, especially in China, where the public market has tumbled.
While the value of private-equity deals in China dropped 58 per cent last year compared with the previous five-year average, an economic slowdown and stock market woes, the private-equity market’s overall returns have outperformed public markets such as bonds and equities, according to the group’s chairman and CEO, Prince Maximilian of Liechtenstein.

“We continue to be optimistic that the private-equity industry will have a good future,” Prince Max said on the sidelines of the One Earth Summit in Hong Kong last week. “In China, it’s strongly established. While the current environment is a little bit more difficult, private equity has always done well.”

He said the private-equity market has most likely reached the bottom and might recover over the next two to three years.

LGT is owned by the House of Liechtenstein, the royal family that has rules the country located between Austria and Switzerland. The group’s assets under management increased to more than US$350 billion last year from US$57 billion in 2006, when the prince took over as CEO.

“We have, over the years, pushed on the private banking side the importance of the private-equity industry,” the prince said. “If you look at the penetration of private equity with private clients, it continues to be globally at the very low level of 2 per cent to 3 per cent of total allocations, while some of the most advanced institutional investors have allocated up to 40 per cent to private equity.”

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The push has been an educational process involving telling private clients about the characteristics of the private market in terms of drawdown, illiquidity and performance, he said. “We can demonstrate through our over 25 years of experience in that sector that the effort has resulted in much better overall returns.”

Private markets, which represented 10.6 per cent of assets under management among asset and wealth-management organisations in 2022, will drive almost half of global revenues in the industry by 2027, according to an estimate by PwC. Private markets include multiple-asset classes such as private equity, private debt and infrastructure.
LGT started its private banking business in Asia in 1999, with a presence in Hong Kong, Singapore, Bangkok, Sydney and Tokyo. The group said that one in four clients originates from the Asia-Pacific region, showcasing its dedication to the region.

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With an eye on the trend of sustainable capitalism, Prince Max founded Lightrock, the group’s private-equity impact-investing arm, in 2021. The company has more than US$5.5 billion in assets under management and invests in sustainable businesses worldwide.

In Asia, Lightrock is currently focusing on India, but China looks promising with investment opportunities in sectors such as energy and electric mobility, Prince Max said.

“The most interesting investment opportunities for me in China are naturally in the sectors that we expect to have a lot of growth from the transformation triggered through climate change,” he said.

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“In the energy and electric mobility sectors, we believe that China is very well positioned and has some great companies that should see a very good long-term growth potential.”

LGT will continue to invest with leading Chinese private-equity firms and incorporate its view on sustainability and environmental, social and governance aspects into investment decisions, according to the prince.

“The whole industry still goes through a learning curve when it comes to integrating the impact dimension into daily decision-making. But the trend is going in the right direction.”

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