Private credit funds appeal to Hong Kong family offices, wealthy investors as returns sizzle amid market challenges
- A KKR survey in January showed 45 per cent of respondents planned to increase their allocations in private credit in 2024, the highest among all asset classes
- Industry still faces challenges from recent China slowdown, property bond risks, Raffles Family Office says
It showcases the appeal of such investment avenues for family offices, or firms managing the fortune of wealthy families, as an alternative to public markets where asset prices have been reeling under high interest rates and economic slowdown.
A survey of family offices by US private equity firm KKR in January showed that 45 per cent of respondents said they planned to increase their allocations in private credit in 2024, the highest among all asset classes. Some 31 per cent will trim their allocations to public equities, the survey showed.
“Private credit is becoming particularly appealing to affluent families who previously found access to this investment avenue restricted due to its exclusivity,” said William Chow, deputy group CEO of Raffles Family Office. “We have observed a significant transformation in the role of private credit to complement a traditional asset allocation model.”
Private credit funds typically lend to companies on a floating rate basis with flexible repayment terms and backed by collaterals, features that yield-seeking family offices or wealthy individuals would appreciate. Returns from this asset class have sizzled, just as access to capital in the public markets became constricted, according to indices compiled by Preqin.
Blackstone, the world’s largest alternative-asset manager, and its partner Daiwa Securities raised more than 40 billion yen (US$287 million) within two months in April last year, touting returns of about 12 per cent. They will channel the funds to invest in US loans via a Blackstone private credit fund.