Apac private credit to reach US$92 billion in 2027 on wealth boom
The growth of Asia Pacific’s private markets comes against the broader backdrop of mounting headwind
[SINGAPORE] The Asia-Pacific private credit market is projected to grow to US$92 billion in 2027 from US$59 billion in 2024, representing a 16 per cent compound annual growth rate, according to an industry report released this week.
This growth is driven by strong demand from institutional and wealth investors seeking yield and diversification, according to a joint report from the Alternative Investment Management Association, via its private credit affiliate the Alternative Credit Council, law firm Simmons & Simmons, advisory firm Ernst & Young and financial data provider Broadridge. There is also accelerating inflows from the wealth segments, driven by new products and digital access, the report said.
Earlier this year, Asia-based digital wealth management platform Endowus launched two alternative asset class portfolios, providing high-net-worth-individual clients access to multiple, semi-liquid private market funds, Bloomberg News reported.
In Australia, several firms have introduced new credit investment vehicles to capture the growing demand for higher returns by well-heeled locals.
The growth of Asia Pacific’s private markets comes against the broader backdrop of mounting headwinds.
Globally, fundraising for the asset class slowed this year to US$70 billion in the period to Jul 22, accounting for just a tenth of the alternative asset inflows, according to JPMorgan Chase. Default rates for private credit deals are at 5.4 per cent, which is in line with that observed in the syndicated loan market, according to JPMorgan.
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“While global credit markets face near term strain, Asia’s structural growth story endures,” said Kher Sheng Lee, managing director for Asia-Pacific at Aima. Expanding economies, regulatory progress, and bank disintermediation are providing opportunities for private credit, he said in an accompanying press release.
Opportunities for private credit include the region’s infrastructure sector, where emerging Asia, excluding China, faces an estimated annual financing gap of US$1.7 trillion, the report said. Renewable energy, transport, and digital infrastructure, including data centres and telecom towers, were identified as high-growth areas for deployment, it added.
Despite its growth potential, Asia’s private credit funds continue to face competition from traditional lenders. Asian borrowers remain highly price-sensitive, often opting for bank loans that are typically 200 basis points to 400 basis points cheaper than private debt, the report said. This is because private credit funds need to meet specific yield hurdles for their debt investments.
In one recent example, South-east Asia telecom tower operator EdgePoint Infrastructure secured a US$475 million loan from a consortium of banks, with terms too tight for private credit funds to participate, Bloomberg News reported.
Beyond pricing, banks offer a suite of comprehensive services, including cash management, revolving credit lines and transaction banking, that private credit funds struggle to match, said the report.
Still, private credit funds retain a competitive edge in serving underbanked small and mid-sized enterprises and mid-market borrowers – segments often overlooked by traditional lenders, said Ester Chow, a partner at Simmons & Simmons. Their ability to offer bespoke, flexible financing and respond quickly to complex or non-standard needs helps fill critical funding gaps, she said. BLOOMBERG
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