Preqin’s Private Debt Online database currently tracks 24 private debt funds in market with a primary geographic focus on Asia. Collectively, they are targeting almost $6bn in commitments, with an average target fund size of $283mn. The table below provides details on the five largest private debt funds currently in market that will primarily focus on investments in the Asian markets.
Of the top five funds in market, three are opting to make direct lending investments and the remaining two are choosing to target special situations and distressed debt opportunities. It is interesting to note that although direct lending dominates the leaderboard, it only accounts for 33% of the aggregate private debt capital targeted by Asia-focused funds, while distressed debt funds are the overall favourite among managers, representing 34% of aggregate target capital. Mezzanine debt financing, historically a prominent strategy, currently accounts for 18% of aggregate target capital.
The table also highlights how the largest managers largely target individual countries when investing in Asia. The top three direct lending funds in market will exclusively target investment in one specific country, while the remaining two will adopt a more opportunistic approach and will consider multiple markets within Asia. This could be due to direct lending funds targeting a very narrow band of returns and therefore have very specific markets in mind.
Asia looks set to continue to attract investment from various private debt strategies. With regional banks adopting a more prudent approach to providing loans, there is a growing market for private debt managers to fill the void. However, the lack of very large funds in the sector shows that managers are focused when it comes to targeting opportunities in the region and industry professionals looking to enter the sector should look to do the same.