Four takeaways from AIMA’s first Asia private credit report

The latest research outlines some of the key attributes of the private lending markets in Asia.

The Alternative Investment Management Association has released its first report on the Asian private credit landscape, ACC Private Credit in Asia, today. The London-based trade body conducted research for the 54-page report in partnership with international law firm Simmons & Simmons and global consulting group EY.

According to the report, private credit emerged in Asia following the regional financial crisis of 1997. Asian high yield bonds that had gone into default were restructured as asset-backed amortising loans.

The report is based on data collected from 28 active private credit asset managers in Asia. It also draws on 15 interviews with Asian private credit asset managers that focused on investors, borrowers, strategies and origination channels, among other issues. Below are the four key takeaways.

The survey shows that pension funds, family offices and high-net-worth individuals make up more than half of Asian private debt managers’ investor base. When broken down by geography, North American investors were the largest investor group, followed by those from Asia-Pacific.

Respondents’ investor bases consisted of 18 percent pension funds, 18 percent family offices, and 15 percent high-net-worth individuals. For Asian credit fund managers, 30 percent of their LPs were from North America, while 23 were from Asia-Pacific.

The report adds that many private credit managers in Asia tend to focus on special situations or opportunistic lending. The typical objective of these managers is to obtain returns of 13-20 percent over three to seven years, according to the survey.

The majority of respondents said their target loan size ranged from $25 million to $100 million. Few fund managers reported a target of more than $100 million.

Deal origination was a top priority for all the private credit fund managers interviewed. The report says many managers highlighted the difficulties in originating private debt deals in Asia compared with the US or Europe.

Responding to a question about deal sourcing channels, most of the surveyed private debt managers in Asia said they sourced their deals via direct relationships with borrowers and industry networks.