Asian Private Credit Fund — Direct Lending Across Asia-Pacific

Asian Private Credit Fund: Direct Lending in Asia's Underpenetrated Credit Markets

Private credit — direct lending by non-bank institutions to corporate borrowers — has grown into a global asset class of around $3 trillion (estimated at over $3 trillion of assets under management by the end of 2024). Yet this growth has been almost entirely concentrated in North America and Western Europe, where the regulatory constraints imposed on banks since 2008 have created the most acute financing gaps for mid-market companies. Asia-Pacific represents a fundamentally different opportunity: Asian banking systems retain significant market share in corporate lending, but structural changes are creating growing demand for private credit that the Asian banking sector cannot efficiently meet.

Asian banks remain heavily weighted towards collateralised real estate lending and relationship-driven short-term working capital facilities. Complex leveraged buyout financing, acquisition bridge lending, growth capital loans with covenant packages, and longer-dated unitranche structures are all systematically underprovided by Asian commercial banks — creating a persistent pricing premium for the small number of non-bank direct lenders with local presence and credit expertise across the region.

This fund targets senior secured and unitranche direct loans to mid-market businesses across Australia, Singapore, Hong Kong, South Korea, and India, targeting net IRRs of 10–13% over an eight-year closed-end fund life.

Target Markets

Australia (approximately 30–35%): Australia has the region's most developed private credit ecosystem outside of Asia's financial centres. The mid-market is deep and well-governed, legal documentation standards are high (English common law heritage), and Australian dollars can be hedged to USD cost-efficiently. Australian mid-market private credit pricing — typically BBSW plus 500–700 bps on senior secured loans — reflects a market at an earlier stage of development than European equivalents.

Singapore and South-East Asia (approximately 25–30%): Singapore provides a hub for lending across South-East Asia, with borrowers operating across Singapore, Malaysia, Indonesia, and Vietnam. SEA mid-market borrowers are typically technology-enabled businesses, consumer franchise companies, and healthcare service providers experiencing rapid regional expansion beyond what domestic banking relationships can easily finance. Singapore's legal system, USD acceptance, and English documentation standards make it the preferred jurisdiction for structuring cross-border Asian private credit.

India (approximately 20–25%): India's private credit market is at an early stage of development but is expanding rapidly. Domestic banks are constrained by elevated NPLs (non-performing loans) and prioritise government securities and large corporate relationships. Foreign non-bank lenders can access yields of 14–18% (pre-USD hedging) on senior secured loans to high-quality Indian mid-market borrowers in sectors including financial services, healthcare, technology, and consumer. The fund manages INR/USD currency exposure through market-standard hedging facilities.

North Asia — South Korea and Hong Kong (approximately 15–20%): South Korean mid-market private credit is driven by the growth of sponsor-backed acquisitions by domestic PE funds, which require acquisition finance that domestic banks price at uncompetitive levels due to capital constraints. Hong Kong provides access to APAC headquarters of multinational businesses and Greater China-linked borrowers with USD funding needs.

Loan Structures and Credit Quality

Senior secured loans: First-priority, fully secured loans against the borrower's assets (property, receivables, intellectual property, shares in subsidiaries). Target loan-to-value ratios of 50–65% at origination, providing meaningful equity cushion below the fund's debt position.

Unitranche loans: Combined senior/mezzanine facilities providing a single tranche of debt to the borrower at a blended yield between senior and mezzanine pricing. Unitranche structures are convenient for borrowers (single lender relationship, simpler documentation) and attractive for lenders (higher blended yield than pure senior, full first-priority security).

The fund targets borrowers with the following profile: revenue of USD 20–200 million, positive EBITDA with sustainable cash flows, strong management teams, businesses with defensible competitive positions in their domestic markets, and leverage ratios of 3.5–5.5× EBITDA at the time of lending. Borrowers are predominantly sponsor-backed (private equity) or established founder-owned businesses.

Currency Management

All fund loans are structured in USD or hard currency (SGD, AUD, HKD — all highly liquid, freely tradeable currencies). Australian dollar and Singapore dollar exposures are hedged to USD using liquid FX forward contracts. Indian rupee exposure is partially hedged and partially managed through USD-based contractual structures. This approach substantially mitigates the FX risk that has historically affected Asian credit returns for USD-based investors.

Deal Origination

The fund accesses deals through multiple origination channels:

• Relationships with regional private equity sponsors who require reliable acquisition finance across Asian deals
• Direct corporate relationships with large family offices and corporates seeking growth capital
• Investment banking relationships providing co-investment access on larger transactions
• Specialist Asian credit brokers and debt advisory firms operating across target markets

The fund targets an origination pipeline significantly larger than deployment capacity, enabling rigorous credit selection — a discipline that distinguishes well-managed private credit vehicles from those that deploy capital into whatever volume the market provides.

Risk Considerations

Credit risk: Mid-market borrowers are less resilient than large-cap corporates in economic downturns. A severe recession across Asian markets simultaneously could lead to elevated default rates and impairment of loan values. Senior secured status and conservative LTV ratios provide protection, but do not guarantee full recovery.

Geopolitical risk: Asia-Pacific is subject to elevated geopolitical tensions, particularly in North Asia. Changes in China-Taiwan relations, Korean Peninsula stability, or US-China trade policy can affect regional business confidence and credit conditions.

Currency risk: Despite systematic hedging, residual FX risk exists — particularly for Indian rupee exposure where hedging is partial. A significant depreciation of Asian currencies against the USD could reduce USD-translated returns.

Illiquidity: Eight-year closed-end fund. No secondary market for interests. Capital committed for the full term.

Legal and enforcement risk: Loan enforcement in some Asian jurisdictions is slower and more uncertain than in English or US legal systems. Australian, Singapore, and Hong Kong deals carry high enforcement confidence; India and some South-East Asian jurisdictions carry more uncertainty.

Suitability

This fund suits sophisticated investors seeking high-yield credit returns from a region with structural growth tailwinds and a persistent private credit pricing premium. It is appropriate for investors who already have private credit allocations in European or US markets and wish to add geographic diversification. The eight-year term and illiquid structure require appropriate commitment. Minimum investment $250,000.

How to Invest

Contact our investment team to receive the fund's private placement memorandum, country strategy papers, sample loan documentation, and current pipeline overview. Professional investor qualification required. Minimum investment $250,000.

Important: Capital is at risk. Private credit returns depend on borrower performance and may not be achieved if defaults are higher than projected. Past performance is not a guarantee of future returns. Emerging and developing market investments carry additional risks. This is for information purposes only and does not constitute a personal recommendation. Seek independent financial advice before investing. This fund illustrates the type of Asian private credit opportunity Global Investments advises on — it is not a live investment offer.