Private equity turns to continuation funds, secondary buyouts as alternative to traditional exits: Morrison Foerster

[SINGAPORE] Private equity (PE) in South-east Asia is expected to increasingly turn to continuation funds and secondary buyouts as alternatives to traditional exits in 2026, according to a report by law firm Morrison Foerster.

This has allowed PE players to extend holding periods and capture incremental value, as well as exit large assets, while managing liquidity amid changing market conditions.

This trend will likely continue in South-east Asia and globally as liquidity engineering goes mainstream.

Morrison Foerster expects continuation funds, secondaries and bespoke structures to be tools to manage duration and distribute cash when exits via initial public offerings (IPOs) and strategic exits remain tough.

Stephanie Kam, counsel at Morrison Foerster, noted that there is some cautious optimism for IPO markets in South-east Asia, with some boosts from policy initiatives to local exchanges. This includes the Singapore Exchange-Nasdaq dual-listing framework announced in December 2025.

As liquidity, valuations and investor confidence recover, so should IPO pipelines, but PE players will likely still hedge their exit strategies with trade and secondary exits, said Kam.

“Using these routes to manage timing considerations and tailor transaction structures to increasingly complex portfolio and investor requirements,” she added.

Continuing momentum

The healthcare segment will likely see momentum continue into 2026 for PE, with investors attracted to rising middle-class demand and higher government health budgets.

Innovation in biotechnology and digital health also add to the attractiveness for strategic and financial investors.

Technology will remain a key driver of South-east Asia deal activity, with digital adoption, AI integration and data-centre infrastructure expected to fuel PE deal activity in 2026.

However, more complexity is expected with increased regulatory scrutiny tied to national security and geopolitical tensions. This also includes ever-stricter data sovereignty and localisation regimes.

“Governments are increasingly treating data centres as strategic ‘critical’ infrastructure, trying to strike a careful balance between tighter oversight and keeping the door open to much-needed capital as digital demand continues to increase at an unprecedented rate,” said Kam.

South-east Asia’s geopolitical neutrality will continue to attract investment in manufacturing, logistics and technology as global supply chains realign. But escalating trade tensions and shifting regulatory frameworks presents some cross-border deal risks to navigate.