The ream of executive orders issued on the first day of the new US administration presented a clear view of the year ahead: Change. Financial markets are cautiously optimistic but are also braced for bouts of fresh volatility. The potential for economic headwinds remains a concern as policy makers, central bankers and business owners anticipate a changing environment with global implications. Despite a marked shift towards lower interest rates in many jurisdictions, the threat of renewed inflation will continue to impact confidence and investment decisions.
As financial markets change, so too do funding needs, challenging the capacity of traditional sources of capital. But we believe that the next four years should present compelling opportunities for providers of private capital. Typically, more agile than banks, private lenders can adapt quickly to changing environments, providing borrowers tailored funding solutions. Indeed, global investors seeking diversified, risk-adjusted returns are increasingly looking to private credit as an alternative to traditional fixed income.
This is particularly true in Asia. The Asian private credit market is a story of untapped potential. With US$99 billion in assets under management (AUM), accounting for just 6.6% of global private credit AUM¹, the region has significant room for growth. With Asia Pacific expected to account for more than a third of global GDP by 2030², the opportunities are worth exploring.
Unlike traditional banks, private credit lenders tend to think “outside the box”, responding to the needs of borrowers and providing lending solutions that, enable faster deployment of funds and greater adaptability. Asia is a region dominated by under-banked, high growth SMEs and private credit remains a sector that is overlooked by global investors. With spreads often significantly wider to its US and European counterparts, and downside protection in the form of collateral, covenants and greater oversight, Asia private credit is compelling.
Across the Seviora Group, we possess a range of investment expertise tailored to suit most investors’ approach, risk profile and investment timeline.
With global uncertainties set to dominate, many investors are eyeing alternative asset classes, particularly in Asia. Our expertise in navigating the private credit landscape is unparalleled. We have deep roots in the region as part of the Temasek ecosystem.
The unlevered yield pick-up in Asian private credit is undeniably attractive, underpinned by strong downside protection, low default rates, and premium spreads.
In this paper, we will take a deeper look at the supply and demand driven factors impacting private credit.
Whilst geopolitical and regulatory challenges persist, many of these are mitigated by strong investment processes, effective risk management, robust governance, and deep local knowledge, offering investors seeking diversification a compelling risk-reward profile.
By the conclusion of this paper, we aim to answer the question, is the yield pick-up for Asian private credit worth the risk?