As analyzed in a previous blog last month, aggregate capital raised by Asia-focused private debt funds grew from $0.9bn 2013 to $6.1bn in 2015. With fundraising levels increasing, the amount of uncalled capital available to Asia-focused private debt fund managers has grown significantly relative to other markets over the past six months and currently sits above the previous peak in 2013 ($9.1bn). Europe-focused private debt fund managers have seen a decline in dry powder from the peak seen in December 2015; however, dry powder for both Asia- and North America-focused fund managers has increased in recent months since the beginning of 2016, rising by 26% and 9% respectively.
The increase in banking regulation under Basel III has meant that Asian banks need to comply with much stricter capital and liquidity rules, which could potentially lead to a slowdown in traditional lending to companies. This slowdown could create more opportunities in the region, which could go some way to explaining the increased level of capital being committed to Asia-focused private debt funds by institutional investors. However, as of 15 June 2016, just one Asia-focused private debt fund has reached a final close, compared with 19 in 2015.
With both Asia- and North America-focused fund managers surpassing their record dry powder levels of 2013, it is clear that the private debt industry is continuing to grow and fill the gap between the risk-free returns of bonds and the higher returns that private equity funds have to offer. Furthermore, with Asia-focused private debt fund managers holding more capital than ever before, this particular market will certainly be one to watch throughout the remainder of 2016.