family office. Corporate finance officer. Open-end private credit fund.
These are just some of the new investor bases and product offerings as Singapore drives its transformation into a regional private credit hub.
“Singapore today has the largest ecosystem of private credit and its practitioners than ever before in the history of private credit,” said Asia Pacific CEO of private markets firm Muzinich & Company. Mr Andrew Tan said. Asian investors.
Asia’s private credit market has grown nearly 30 times over the past two decades, jumping from just $3.2 billion in 2000 to more than $90 billion by June 2022.
Singapore plays a key role in that growth. Over the past seven years, private credit (loans made to businesses by entities other than banks that are neither issued nor traded on the public market) has attracted nearly every major player.
Andrew Tan
muzinich & company
From Apollo and Blackstone to HPS and Oaktree, private credit management companies have set out to not only raise capital from Asia, but also build strategic partnerships with investment teams and other management companies. .
While there is no doubt that funding will be difficult in 2023, there is no doubt that the ecosystem of private credit operators has developed rapidly.
Regulatory support… and COVID-19
Much of the loan has been donated to the Monetary Authority of Singapore (MAS), which has decided to allocate $1 billion to private credit managers worldwide in 2022, among other initiatives.
The initiative was part of MAS’s Private Markets Programme, launched in 2018, which aimed to enhance the city-state’s status as a regional private market hub.
“that [MAS mandate for private credit] This creates an opportunity for these private asset companies to set up shop in Singapore,” said Angelia Chin Sharp, Singapore CEO of BNP Paribas Asset Management.
The reduction in global bank lending due to tighter regulation, the pursuit of higher yields under the previous year’s low interest rate regime, the recent slump in public markets, and the rise in income and wealth in Asia are also critical to the rise of private financial institutions. played a role. credit.
Still, it was Covid-19 that changed the course for Singapore, according to some experts.
Muzinich’s Tan said, “Hong Kong used to be the main focus in the private credit sector, but after COVID-19, many companies have set up satellite offices in Singapore or moved their entire operations to Hong Kong. I have decided to do so.”
“Over the past four years, Singapore has built a very strong private credit community, and now Singapore seems to be more favored than before,” Mr Tan added, adding that private credit now stands at almost 50%: He pointed out that the focus is on 50. Practitioners in Singapore and Hong Kong.
A significant retreat in global liquidity to mainland China and Hong Kong is also prompting investors to look elsewhere for investments.
“Hong Kong remains important, but Southeast Asia, South Asia and Australia have become areas of interest for global investors,” Mr Tan said.
“Singapore has elevated itself as a regional hub because whether you are looking to invest in Indonesia, India or the Philippines, funding discussions take place here.”
For investors looking to invest across South and Southeast Asia, Singapore is becoming a regional hub for funding discussions. Image credit: Shutterstock
new investor
The boom in private credit has enabled several developments not previously seen in Asian markets.
More wealth platforms are putting alternative assets on their shelves, making them accessible to investors from all walks of life.
Gregory Van
Endus
One such platform is Endouus, which CEO Gregory Van said is now “at a stage where we can bring some of the world’s best institutional-level private market strategies to Asia for the first time.” Asian investors.
“We’ve seen a huge increase in interest in distributing private credit and private equity to a broader audience.”
Launched in 2018, the wealth platform caters to individuals as well as family offices, charities, and endowments.
Rapidly growing family office
The growth momentum for Singapore’s private credit entities will come from traditional institutional investors such as insurance companies and pension funds, as well as investors who have not previously tried the asset class, such as family offices. is increasing.
Family offices are increasing explosively in Singapore, with more than 1,100 family offices as of the end of 2022.
Family offices are one of the fastest growing segments in Asia, but the challenge is that the market segment is highly fragmented, said Co-founder and CEO of digital alternatives marketplace Alta. CEO Kelvin Lee points out.
“Traditional investor relations models, traditional capital distribution models, or even traditional private banking channels are not necessarily cost-effective,” he said. Asian investors.
kelvin lee
Alta
Headquartered in Singapore, Alta (formerly Fundnel) has partnered with Hong Kong’s multifamily office, Rockpool Capital and Cachet Group, as well as Singapore’s private debt platform Kilde, to provide global alternative investment opportunities through digital markets. We have formed several partnerships across the region.
Family offices tend to be relatively impatient investors, unwilling to park their money in illiquid investments for long periods of time, so managers have had to tweak product specifications.
“We no longer see patient wealthy families or people who are first-time limited partners (LPs) persevering. They want to be able to choose an exit if they want,” Lee said. Told.
“More funds are considering opening a fund or structuring a fund in another way to mimic the risk-reward return required for the trade-off of capital invested in the fund,” Lee added. .
Family office openings are rapidly increasing in Singapore.
Image credit: Shutterstock
new trends
As a result, there is growing interest in open-end net asset value market funds.
Other experts agree: “NAV-marked and non-closed-end funds will be launched over the next three to five years.” Must be marketed on a monthly or quarterly basis. This will be an important development for the industry,” Endus’ Van said.
He added that how fund managers manage the liquidity part of their portfolios will be critical to money management.
According to Alta, open-end private funds are not just family offices, and even corporate treasurers see benefits in such investments.
“Corporate financial directors and small business owners have fixed deposits, and from an investment perspective, an unrestricted private credit fund works perfectly. It’s a whole new segment of private credit fund investors that we’ve never seen before,” said Alta’s Lee.
Alta, which also has operations in Malaysia, sees further opportunities in the Islamic finance sector, particularly in products for organizations managing hajj funds.
“Another interesting trend is general partner (GP) type index funds, which instead of country funds take stakes in a number of GP funds to express their views on a region. ,” Alta’s Lee added.
But all this is just the beginning of the region’s efforts to develop its private property industry. “We are in the early stages of further developing our services for the private market,” said Endowus’ Van.
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