Private credit is a nascent asset class in the Asia Pacific (APAC) region, with tremendous growth potential and opportunity for investors.
There are four key reasons we think the asset class deserves more attention in the coming years:
1. The lion’s share of future global economic growth is expected to happen in APAC. Though public markets are evolving, we believe private credit is better suited at the moment to capture the dynamism of the region’s businesses.
2. An allocation to private credit in APAC can diversify exposure to private credit in North America and Europe. The variety of economies, ranging from fast-growing emerging markets to huge developed economies, adds to the diversification potential.
3. Multiple demand drivers beyond GDP growth can help sustain the growth of private credit in APAC, in our view, including the maturation of the private equity market and a dearth of flexible, accessible capital.
4. We believe lenders with deep, flexible pools of capital and the ability to partner with a range of borrowers in the region will tend to have better negotiating power on protections and terms relative to the United States and Europe, where private credit markets are generally more crowded.
In this paper, we will discuss the supply and demand factors shaping the growth of private credit in APAC, how different types of private credit strategies can help fill in financing gaps for sponsors and companies, how we think about relative value in the market, and the importance of deep local relationships in a complex and diverse region.