The boom in private credit and private equity is poised for a reality check as an untested credit cycle collides with fragile exit routes in Asia’s public markets, two senior investment executives said at a conference in Singapore.
Private markets have expanded in Asia Pacific over the past decade, with buyout activity reaching $138 billion in 2024, the second-best year in a decade, Deloitte data shows. Private credit assets under management in the region have surged more than six-fold since 2014 to about $93 billion as of September 2023, according to Preqin.
Michael Goosay, chief investment officer and global head of fixed income at Principal Asset Management, said the influx of capital into private assets had shifted risk away from public markets without testing how those borrowers would fare in a downturn.
“I do worry about the private markets,” Goosay said at a panel session at the Milken Institute Asia Summit in Singapore on Wednesday.
“We haven’t been down through a true cycle. There’s been a lot of money chasing the returns that are promised in these private equity, private credit types of products,” he said.
Abundant private funding had “pulled capital away from the public markets” and riskier issuers have migrated to private balance sheets, he added. “Those are the companies that wind up having problems when the economy is turned,” he said.
Speaking at a panel session at the same conference on Thursday, Jeffrey Jaensubhakij, an adviser to Singapore’s sovereign wealth fund GIC, said private equity in Asia still struggles to exit investments because public markets, except India, have not offered reliable valuation and liquidity windows.
“Japan has been very successful and it’s got a value-added corporate governance push. Korea is pushing very hard. I think this, amongst other things, will also help those public markets perform well, allow for exits, and then private equity can then follow,” he said.
Reuters
