By Eddie Ong, Deputy CIO and Head of Private Investments, SeaTown Holdings International
We are pleased to share that our Deputy CIO and Head of Private Investments, Eddie Ong, has published a byline in The Business Times on why Asian private credit is emerging as one of the most compelling risk-reward opportunities globally. He offers a clear view of how the market is shifting and what these developments mean for investors.
Read the full piece below or in the following link at The Business Times: 🔗Asian private credit – an attractive risk-reward opportunity
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Asia-Pacific’s private credit ecosystem is undergoing a quiet but powerful transformation that could redefine how the region’s companies access growth capital. While just 6.6% of the global US$1.5 trillion private credit pool was attributed to APAC as of end-2023, the pace of expansion is striking. Private credit AUM in the region is projected to rise from US$59 billion in 2024 to US$92 billion by 2027, representing a 16% compound annual growth rate, according to a recent report from the Alternative Investment Management Association. The implications are significant for companies, institutional investors and the future of corporate finance across the region.
Macro Drivers Create a Compelling Backdrop
Asia-Pacific is in the midst of one of its strongest corporate expansion cycles in decades. With annual GDP growth forecast above 4% for at least the next five years, and the region set to contribute more than a third of global economic output by 2030, the demand for capital is intensifying. Yet, regulatory guardrails such as stricter Basel Accords have led regional banks to scale back on non-core and more complex corporate lending. Companies, particularly those seeking to scale quickly, face a new challenge: where to find flexible, long-term institutional funding.
Herein lies the unique appeal of private credit. Unlike traditional loans or capital market raises, private credit offers corporates customised solutions – often tailored in close partnership with borrowers, and structured with both downside protection and growth objectives in mind. For investors, the opportunity lies in accessing high-quality transactions in a region marked by structural inefficiencies and economic dynamism.
Uncovering True Value in the Risk-Reward Equation
One of the most notable features of APAC private credit is its spread advantage over developed markets. As of June 2025, Western private credit spreads, reflecting increased capital inflows and softening monetary conditions, hovered at historical lows around 500bps. By contrast, the J.P. Morgan Asia Credit Index High Yield ended the same period at 450bps, with direct private credit transactions in APAC routinely commanding an additional premium of 300-500bps.
This spread exists not just because of perceived risk, but because of market inefficiencies stemming from supply-demand mismatches. APAC’s private credit transactions often require deep structuring expertise and local insight, but the payoff is compelling: enhanced yield with downside protections not commonly found in Western markets.
Stringent Protections and Strong Security Packages
Whilst Western markets have moved towards “covenant-lite” structures, where borrower protections are thin, APAC lenders continue to insist on strong documentation and real, often multi-asset, collateral. Loans are typically secured with a mix of real estate, listed shares, and personal or corporate guarantees. In many cases, collateral may even sit outside the borrowing entity, providing an additional buffer in downside scenarios. Maintenance covenants are also commonly applied to a borrower’s balance sheet to monitor ongoing financial health, unlike incurrence covenants, which trigger only at specific events. This more conservative approach has real implications for recovery rates should a deal go south.
Moreover, innovative features such as equity kickers, warrants that allow lenders to share in a company’s future growth, can be embedded. This means that investors are not just collecting coupons; they are participating in the upside of Asia’s fast-growing enterprises, an attractive proposition as regional equity valuations remain modest compared to the US or Europe.
Navigating Opportunities and Challenges
While APAC private credit presents compelling opportunities, the recent stress in US private credit markets underscores the importance of the disciplined approach and conservative structuring that has characterised the Asian market. Success in APAC requires deep local expertise to access regulatory environments, currency risks, and varying legal frameworks across jurisdictions. Lenders must carefully evaluate borrower transparency standards and ensure robust documentation, while borrowers should prepare for more intensive due diligence processes and higher covenant compliance standards. Investors must also navigate concentration risks, liquidity constraints, and the need for specialised local partnerships to fully capitalise on market inefficiencies.
As the region’s financing ecosystem matures, the most successful participants will be those who balance opportunity with prudence – prioritising strong governance, rigorous structuring, and genuine partnership with borrowers. For those willing to commit the expertise and resources, APAC private credit represents more than just a yield opportunity, but a long-term allocation to the region’s structural growth and resilience in an evolving global economy.
Sources: Preqin Global Report: Private Debt 2025, Alternative Investment Management Association: Private Credit in Asia 2.0, International Monetary Fund, World Economic Outlook: Real GDP Growth (accessed January 25, 2025), Pitchbook LCD, Bloomberg
