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Asset Management / Wealth Management
Asia investors keen to boost private credit allocations
Senior debt, special situations and distressed credit are among the most popular strategies
The Asset 8 May 2024

Private credit continues to be an attractive asset class, and investors are committed to putting more capital to it in the near term, a survey finds.

Two in three investors polled are currently allocating to private credit, and over 70% of respondents are ready to increase allocation within the next 12 months, according to a recent poll conducted by investment firm Cambridge Associates.

The survey involved 42 respondents representing institutional investors, private clients and family offices based in Singapore and Hong Kong.

For those who have existing private credit allocations, more than half currently invest in one or more private credit strategies, demonstrating investors’ understanding of the diversifying role that private credit can play in a portfolio.

Senior debt as well as special situations and distressed credit were among the most popular strategies. Just over 60% of respondents identified senior debt as an existing strategy in their portfolio.

Meanwhile, close to a quarter of institutions and almost half of private clients and family offices indicated that they also have exposure to special situations and distressed credit strategies in their portfolio.

Senior debt, special situations and distressed credit strategies also remained top of mind for clients when asked which strategy they intend to increase allocation to in the next 12 months, suggesting that the objectives of capital preservation and return maximization were the key focus.

“There continues to be a robust opportunity for private credit in Asia investors’ portfolios amid a combination of factors such as higher base rates, a retrenchment of bank lending appetite and stressed borrowers,” says Cambridge Associates managing director Audrey The.

“Yields are higher and covenants and loan documentation are tighter, particularly in the middle market, than they have been in the ‘zero rate’ recent past, resulting in compelling opportunities across the asset class. We believe investors that can select managers with the ability to identify quality businesses in need of capital and to structure creative solutions will be able to generate attractive risk-adjusted returns.”

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