Increased banking regulation under the Basel III framework will require Asian banks to comply with much stricter capital and liquidity rules. The tightening of credit standards and regulations could potentially lead to a slowdown in traditional lending to companies and create further opportunity for private debt managers in the region.
The chart above shows that private debt fundraising has continued to grow since 2013, although 2015 values failed to surpass the peak seen in 2012, when 19 Asia-focused funds reached a final close for an aggregate $8bn. While the 17 funds closed for $6.1bn in 2015 represent a second successive year of fundraising growth, no funds have closed in 2016 so far.
Preqin’s Private Debt Online contains detailed information on the 21 Asia-focused private debt funds currently in market, targeting an aggregate $9.4bn, which could see fundraising over 2016 improve in the second half of the year. Direct lending vehicles account for 34% of all Asia-focused private debt funds currently in market, followed by distressed debt (26%) and mezzanine (25%) funds. The onset of Basel lll and a slowdown in some Asian economies means that there could be plenty of opportunities in the near future for private debt fund managers to put investor capital to work in the region, with an increasing number of firms looking to enter the Asian private debt industry. Carlyle Group’s Carlyle Asia Structured Credit Opportunities Fund and Intermediate Capital Group (ICG)’s ICG Asia Pacific III are two of the largest offerings currently in market, with both funds targeting $1bn in institutional investor capital. The former is Carlyle Group’s first dedicated structured credit Asia-focused vehicle, while the latter is ICG’s third Asia-focused mezzanine fund.