Global private equity giant EQT ramps up in Asia: Betting on early-stage innovation and domestic demand in China

EQT, one of the world’s largest private equity firms, is making a significant bet on the Asian market, viewing the region as a core growth engine and adopting a differentiated strategy in China by focusing on early-stage innovative companies and industries driven by domestic demand.

On November 19th, according to media reports, EQT CEO Per Franzén stated, "Asia represents a huge growth opportunity for us... some of the most attractive projects in our investment pipeline are coming from Asia." In the Chinese market, EQT believes the early-stage investment strategy holds more promise than acquisition-led strategies and is optimistic about innovation-driven growth opportunities, rather than traditional mature market M&A transactions.

Reports indicated that EQT’s Asian strategy focuses on domestic demand rather than cross-border trade, aiming to avoid geopolitical risks by investing in sectors such as services, software, education, and financial services. The firm’s longtime Asia chairman, Jean-Eric Salata, noted that this strategy enables its assets to better withstand external shocks like trade tensions.

Notably, the report also stated that, unlike some private equity managers who blame weak exits on high interest rates, EQT says its investment decisions and results are largely independent of the monetary cycle.

China Market Strategy: Focus on Early-stage Innovation Rather Than Traditional Acquisitions

According to the report, EQT sees different opportunities in China.

"We see more interesting opportunities in China in early-stage strategies, where there is a lot of innovation and significant room for growth," said Salata.

This assessment matches market data. According to a Bain & Company report released this year, China accounted for more than half of Asia-Pacific private equity deal value in 2020, dropping to 27% by 2024.

Asian Market Becomes New Global Private Equity Focus

The report said that EQT’s heavy bet on Asia reflects a shift in global private equity industry trends. The company states that more global private equity investors are seeking portfolio diversification and allocating more capital to the Asian region.

EQT raised more than $10 billion in April this year for the BPEA Private Equity Fund IX, which launched in August 2024 with a target size of $12.5 billion. Additionally, the firm plans to invest about $930 million in Korean enterprise software provider Douzone Bizon.

Competitor KKR recently revealed that half of the private capital it expects to return to investors in 2025 will come from Asia. The New York-based firm even held its board meeting in Tokyo for the first time, underscoring its commitment to the Asian market.

The company emphasizes that its investment focus in Asia is on companies related to domestic demand rather than those reliant on cross-border trade flows, thereby allowing its portfolio to better withstand geopolitical risks.

The company cited examples of the effectiveness of this strategy. Salata noted: "We own one of the largest hospital groups in India, specializing in gastrointestinal surgery. The business is thriving and is entirely unrelated to trade or complex issues like trade tariffs."

According to the report, EQT’s Salata said that the Asian market is more inefficient than the U.S. and Europe, providing investors with a "structural alpha opportunity." Salata said:

"This market is quite inefficient, more so than the U.S. and Europe in many aspects. To capture this alpha, you really need to be grounded locally and build a localized team."

EQT currently employs 350 staff in Asia. He pointed out that Asia’s complexity and relatively high market entry barriers make localized operations essential for sourcing deals, recruiting talent, and driving exits.

An Investment Logic Not Reliant on Interest Rate Cycles

Facing challenges posed by high interest rates for the private equity industry, EQT emphasizes its decisions and results are largely independent of monetary cycles.

Franzén stated the company is not counting on interest rates falling: "We certainly do not expect rates to drop... The key is to continue investing in value-creating capabilities."

Citing the March acquisition of international school operator Nord Anglia Education alongside a consortium, EQT noted the deal valued the company at $14.5 billion. Salata said:

"People want to invest more in their children’s education, especially in this region. We returned $10 billion to investors—this was achieved in a very challenging interest rate environment."

He emphasized: "If you have the right assets in the right industries and are creating value for the companies, we try to create an all-weather strategy not necessarily linked to interest rate trends."

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