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Private credit market is a ‘big story’ in Asia though institutional investors have become selective, say industry experts
- The number of private debt funds in the Asia-Pacific region grew by 22 per cent to 94 at the end of 2023 compared with a year before
- ‘We are just scratching the surface of the opportunity’ in Asia’s private credit market, says Soo Cheon Lee, co-founder of Hong Kong-based SC Lowy
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Hong Kong-based credit investment firm SC Lowy is raising a private debt fund with a target size of up to US$800 million, nearly eight times larger than its first one.
The move shows financial institutions such as SC Lowy are betting on the flourishing private debt market – in which credit is neither extended by a traditional bank nor publicly traded – to generate higher returns and bridge a funding gap amid elevated interest rates and an economic slowdown.
“Asia is really at a turning point in the private credit opportunity,” said Soo Cheon Lee, co-founder and global portfolio manager of SC Lowy, which manages about US$1.4 billion in assets. “We are just scratching the surface of that opportunity.”
Private debt assets under management in the Asia-Pacific region reached US$124 billion as of last September, according to data provider Preqin. That still represented only 7 per cent of the US$1.7 trillion global private debt market, in which the United States dominates.
Private credit took off in the US after the 2008 global financial crisis. American banks shrank their balance sheets, and regulators introduced stringent capital rules, which created a lending vacuum that nonbank players could fill.
That story is being played out in Asia as banks have become conservative in lending to riskier assets.
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