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Peter Shadbolt

Since the global financial crisis of 2007-08, private credit – nonbank lending from institutional investors direct to businesses or individuals – has gone from strength to strength.
In Europe and the United States, it now forms an established part of the corporate financing firmament as banks pull back from traditional lending.
According to Macquarie Asset Management in November 2023, the global private credit market is now estimated at around US$1.2 trillion, with annual fundraising growing particularly during Covid-19, from US$120 billion in 2021 to US$225 billion in 2022.
In the Asia-Pacific region, however, it remains a comparatively underpenetrated segment.

According to data from Preqin Pro, Asia-Pacific-focused private credit fundraising inched higher to US$5.89 billion across 33 funds in 2024, up from the US$5.48 billion raised from 32 funds in the previous year.
While the growth is modest, wealth managers in the region are increasingly excited by what they see as the potential for private credit to plug a widening lending gap and provide an attractive investment vehicle.
“Borrowers are only just starting to realise the benefits of private credit through the flexibility, execution certainty and speed of decision making that comes from working with private credit providers, compared to traditional forms of debt funding,” Michael Jones, managing director at PGIM Private Capital, said.

“Greater awareness of the benefits of staying private and using debt to fund growth should support continued adoption, particularly while equity markets remain challenging for new IPOs across the region,” Jones elaborated.
Private credit penetration in APAC should continue to increase “as it remains considerably under-represented across the region, including in Hong Kong, relative to other markets such as the US and Europe”, he added.
The factors driving its strong expansion align with a growing volatility in markets: banks are lending less due to regulatory constraints, creating an opening for private lenders; higher interest rates are making private credit attractive as a high-yield investment; and investors are increasingly seeking alternatives to public markets.

“The global financial crisis helped turbocharge the private credit industry as regulated lenders were discouraged from holding senior bank loans,” said Mattis Poetter, co-chief investment officer of Arcmont Asset Management, from asset manager Nuveen.
“Each subsequent crisis served to underline the attractiveness of the asset class,” he added. “The European sovereign debt crisis, the US taper tantrum, and Covid all helped place private credit on a steady upwards trajectory. Driven by the fundamental supply-demand imbalance for credit on both sides of the Atlantic, private lenders offered increased capacity, greater efficiency, and non-dependence on third-party ratings agencies.”

The most recent wave of macro troubles – inflationary pressure and the war in Ukraine – are no exception to the trend, he noted.
“As liquid-market activity fell significantly, private credit was able to step up and step in,” Poetter explained. “The combination of locked-up capital and experienced managers able to access attractive credit opportunities has allowed private credit to take increased share from banks and liquid bond markets.”
China’s economic restructuring, particularly the slowdown in real estate and the tightening of credit by traditional banks, has further opened opportunities for private lenders.
As property developers and mid-sized enterprises struggle to secure financing, private credit is stepping in to fill the gap, offering structured solutions that banks are hesitant to provide.
Hong Kong is uniquely positioned to benefit from the shift. Its established role as a financial gateway to China, coupled with its well-developed legal and regulatory framework, has positioned it as a natural hub for private credit expansion in APAC.

The region’s institutional investors, family offices and wealth managers, meanwhile, are showing a growing interest in direct lending, distressed debt and other bespoke credit structures.
Jones ultimately sees private credit becoming a mainstream asset class for wealth managers and private banks, moving beyond institutional investors and family offices.
“We believe that private credit will continue to expand and be seen as an attractive form of fixed income exposure for wealth managers and private banks, given the attractive risk/return dynamics,” he said, adding that investments in private credit favour safer, asset-backed loans where lenders have strong legal protections and repayment priority.
“With underlying investments being primarily first lien and senior secured, the current era of higher base rates is driving attractive returns,” he said. “Private credit should also perform well when there is increased volatility in public markets.”
Demonstrating how private credit is evolving beyond traditional direct lending, the Swiss private equity firm Partners Group has become one of the first nonbank lenders to issue a net asset value (NAV) loan in APAC.
The loan, made to a pan-regional general partner (GP) to support follow-on investments, signals the growing acceptance of private credit as a viable alternative to banks for private equity managers seeking flexible fund-level financing.
A form of fund-level financing backed by the NAV of the underlying fund, it has gained traction globally, with the market estimated at US$100 billion and poised for significant growth in the coming years.

As private credit continues to mature in APAC, the rise of NAV-based lending solutions could provide alternative liquidity options for GPs and further solidify private credit’s position.
While these innovations demonstrate private credit’s growing role in APAC, challenges remain that could shape the market’s trajectory in the coming years. Key risks include liquidity concerns, increased regulatory oversight, and questions about the sustainability of high yields.
Unlike public bonds, private credit investments are often illiquid, meaning investors must be comfortable locking up capital for extended periods.
A weakening economic outlook, particularly in China and other APAC markets, also raises concerns about borrower defaults and stricter regulations on what some regard as a hot market.
There are also risks emerging from an over-reliance on high yields. The current appeal of private credit is partially driven by high interest rates. If rates decline significantly, investor appetite for private credit could weaken.
Despite these risks, investors remain upbeat.
“Investors won’t necessarily see the unprecedented risk-reward ratio of recent years, but having a strong portfolio in a higher-for-longer regime will ensure continued success,” noted Nuveen vice-chairman Randy Schwimmer.
Looking ahead to 2025 and beyond, the private credit market in Hong Kong and the broader APAC region is expected to grow strongly.

Private banks are increasingly integrating private credit into their offerings to enhance client portfolios. For example, Standard Chartered this week launched the Private Markets Co-Investment Club, providing ultra-high-net-worth clients with access to private market investments, including private credit opportunities.
Similarly, National Australia Bank is expanding its private credit offerings in response to client demand for fixed-interest income, reflecting a broader trend among private banks to incorporate private credit into their services.
Developments such as these indicate that private banks are not viewing private credit as competition, but as a complementary asset class that aligns with their mandates to offer diversified investment opportunities to clients.
The combination of bank retrenchment, institutional adoption and evolving investor preferences is setting the stage for private credit to become a dominant force in the region’s financial ecosystem.
Experts also believe that private credit as an asset class will continue to show strong returns for the simple fact that interest rates will not come down with anywhere near the speed they have gone up over the past year.
Having a strong portfolio will allow investors to continue to raise funds and continue to invest, Schwimmer noted.
“If you’ve been successful in a higher-for-longer regime, you will be even more successful next year.”


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No longer niche: how private credit is transforming the APAC lending landscape

Since the global financial crisis of 2007-08, private credit – nonbank lending from institutional investors direct to businesses or individuals – has gone from strength to strength. Photo: Getty Images/AFP

With banks reducing lending due to regulations, APAC’s private credit market is set to grow, with Hong Kong uniquely positioned to capitalise on the surge, attracting investors seeking high-yield, asset-backed loans. Photo: Edmond So

Michael Jones, managing director at PGIM Private Capital. Photo: Handout

The global financial crisis of 2007-08 was a boon to the private credit industry. Photo: Reuters

Subsequent crises, including the Covid-19 pandemic, also helped pave the way towards greater acceptance of private credit. Photo: Reuters

China’s economic restructuring – particularly the slowdown in real estate and the tightening of credit by traditional banks – has further opened opportunities for private lenders. Photo: Reuters

The global private credit market is now estimated at around US$1.2 trillion. Photo: Shutterstock

Private credit fundraising grew particularly rapidly during the Covid-19 pandemic, from US$120 billion in 2021 to US$225 billion in 2022. Photo: Shutterstock

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From left to right: Gregory Van, CEO of Endowus; Steffanie Yuen, head of HK Endowus; Samuel Rhee, chairman and chief investment officer of Endowus. Photo: Dickson Lee

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Endowus’ managing director and Hong Kong head, Steffanie Yuen. Photo: Jocelyn Tam

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Special Reports

As rising interest rates and market volatility push investors towards alternative assets, private credit is gaining traction – though some question whether the sector can maintain its strong returns


As rising interest rates and market volatility push investors towards alternative assets, private credit is gaining traction – though some question whether the sector can maintain its strong returns.


Private credit

Banking & finance

Investing

Financial regulation

Global Financial Crisis of 2007-2008

Euro Zone Crisis

Coronavirus pandemic

China property

Hong Kong economy

China economy