Preqin’s Private Debt Online shows that there are currently 23 private debt funds in market which focus on Asia and Australasia, with these funds targeting an aggregate $10.3bn. Six of these are special situations vehicles, targeting an aggregate $5.7bn, accounting for over half (55%) of the capital being raised for investment in the region. This clearly shows that private debt fund managers see potential opportunities for special situations debt financing in Asia-Pacific.
Preqin defines special situations as investments that focus on event driven or complex situations, where a fund manager may be able to exploit pricing inefficiencies due to an expected or actual significant event. One possible reason for the rise in such fund structures could be China’s policy of state-owned banks serving as an obstacle to direct lending funds gaining traction in that region. Raised by Adamas Asset Management, Greater China Credit Fund is the only direct lending fund that exclusively targets China. It requires investee companies to have offshore assets as collateral and have enforcement in Hong Kong, serving as a means to bypass certain regulations yet still be able to get a foothold in the Greater China region. Such inefficiencies could be a driving factor for special situations funds to generate interest within Asia-Pacific.
The largest special situations vehicle currently raising capital for investment in the region is ADV Opportunities Fund I, currently in market with a target of $550mn. ADV Partners intends to allocate capital from the fund towards Australia, China, India, Indonesia, Malaysia, New Zealand, Philippines, Singapore, Thailand and Vietnam. The next largest special situations fund currently in market is SkyPath Arrow Fund, the maiden fund of SkyPath Capital Partners. The fund is seeking to raise $500mn and will target the energy, mining, natural resources and power sectors within Asia-Pacific.
Significant amounts of capital are entering the Asia-Pacific private debt market, as fund managers look to take advantage of potential pricing inefficiencies within an exciting and dynamic region. It will be interesting to see how the current predicament facing Chinese markets will affect the activities of those managers seeking investment over the longer term, and how much capital will eventually be raised in this sector by the end of the year.