Buoyed by the growing interest in Asia, asset managers are expanding their private market offerings to build larger empires, and Hong Kong is seen as a lynchpin hub connecting other markets and investors to China and Asia, according to speakers a recent business leaders’ summit in the city.

However, while public markets in Hong Kong and China have been on a roll this year, the private markets are lagging due to the geopolitical uncertainties that have dampened the excitement among private market participants, says Jon Gray, president and COO of Blackstone, the world’s largest private capital group, speaking at the Global Financial Leader’s Investment Summit organized by the Hong Kong Monetary Authority ( HKMA ) on Tuesday.

In addition to the generally positive nature of the current tariff discussions ( between China and the US ), which Gray has confidence in, he believes that private markets will ultimately follow the upbeat trajectory of their public counterparts.

“The fact that the Shanghai index is up and Hong Kong’s initial public offering ( IPO ) market is going to be the leading IPO market in the world this year signals to investors that liquidity is coming back,” he says. “So, you will begin to see more focus on private markets in Greater China.”

Sentiment in Hong Kong is also changing, he shares, with opportunities expected in the battered real estate sector.

Another speaker at the summit, Emmanuel Roman, CEO of Pimco, the world’s biggest active bond manager, adds: “Every investor we have is underinvesting in Asia. Hong Kong is the gateway to China and Asia as a centre, and it has a role to play in the capital markets.”

Changing rules

The private market used to be a closed-door game accessed by only top-notch investors, Gray shares. Now, it has been rapidly explored as a treasure trove of opportunities by investors seeking diversification and higher returns.

“If you go back to a couple decades ago, we had just a couple hundred customers – pension plans, sovereign wealth funds, endowments,” Gray points out. “We have expanded with more insurance and institutional clients, and with the idea of creating [alternative] products that others can access. It’s expanding on what we do to give the differentiated returns to individual investors.”

Allocation to alternatives, Gray states, is also driven by strategies of diversification away from public markets, which have seen multiple waves of volatility following the US President Trump’s “Liberation Day” tariff announcements.

Roman, who sees Pimco’s portfolios tilting more towards private assets, explains that seeking higher return in fixed income is more costly than in private markets, which is steered by market price. In addition, he raises concerns over the stability of investment-grade bonds.

“Things look good without a recession,” he says, “better than they are on a risk-adjusted basis.”

In search of stable and high returns, private credit delivered a 170-basis-point premium to Blackstone’s insurance clients last year, according to Gray. Saved costs in origination and securitization also appeal to end-investors in a direct-to-customer model.

Potential risks

Meanwhile, low credit borrowers are a ticking time bomb, Roman states, before asking “How many more are there of them? It’s very hard to tell” and noting that the artificial intelligence sector tops the watchlist as most of the deal activities are happening there.

However, while Gray states that he is aware of stressed borrowers in some high-profile bankruptcy cases, he thinks that it isn’t appropriate to write the whole market off. “When we look at the credit books of banks involved in the public debt market, the default rate is very low,” he argues. “To me, that’s more representative than a couple of these idiosyncratic cases.”