Alta & Aletheia Capital Private Credit Sector Report: Private Credit Market a Growing Asset Class with $1.2 Trillion Global AUM
20th April 2023 | Hong Kong
Alta and Aletheia Capital have released the Private Credit Sector Report for Asian investors, providing key insights on the Private Credit market and as a growing asset class with $1.2 trillion global AUM (Assets under Management). Alta is Southeast Asia largest digital marketplace for alternative assets with over $600 million transactions completed and $22 billion worth of mandated opportunities. Aletheia Capital is the largest independent investment advisory firm with 2,500 clients managing over $15 trillion in AUM. The Private Credit Sector Report assessed private credit as an investment category and its risks, while sharing recommendations for investors in Asia looking to consider private credit options. According to the report, the private credit market may be on the cusp of a further boom, offering higher yields compared to traditional fixed-income investments (yield that is 3% to 4% above the 2-year US treasury funds level). More info below.
“ Private Credit Market a Growing Asset Class with $1.2 Trillion Global AUM “
Aletheia Capital Head of Consumer & Internet Nirgunan Tiruchelvam:“Private credit can provide superior yields, lower volatility, and diversification in the current market environment. We are excited to launch our insights and views on private credit in partnership with Alta, who today offers some of the widest options for accessing private credit for accredited investors.”
Alta Co-founder & Chief Commercial Officer Benjamin Twoon: “Private credit is one of the fastest-growing asset classes in recent years and we are extremely excited to launch our Private Credit Sector Report in partnership with Aletheia Capital.
At Alta, we are committed to helping investors consider a range of alternative investment opportunities, including private credit products like senior credit and venture debt as a means of increasing returns while mitigating macro risks.”
Alta & Aletheia Capital Launches Private Credit Sector Report
What is Private Credit?
Private credit is defined as non-bank lending where the debt is not issued on the public markets. It refers to the lending by private investors or organizations, rather than by traditional financial institutions such as banks. This type of credit typically involves investments in unlisted debt securities or direct lending to borrowers. It may offer higher returns than traditional fixed-income investments, but also carries greater risk. Private credit has risen in popularity in the last five years among family offices. UBS publishes a survey of family offices annually. The 2022 UBS Global Family Office states that 27% of the investors are taking on private debt. In 2017, the proportion was 8%. The average family office holds 10% of its asset allocation in private debt, according to Preqin, a data company. The proportion of private credit allocation among pension funds was 2%. The appetite for private credit among family offices is set to rise. A survey conducted by Alternative Credit Council estimated that 50% of family offices plan to increase their private credit exposure. This is an asset class whose time has come.
Alta and Aletheia Capital:
According to the report, the private credit market may be on the cusp of a further boom, offering higher yields compared to traditional fixed-income investments (yield that is 3% to 4% above the 2-year US treasury funds level). In a time of increasing demands for different and more flexible private market products, the size of the private credit market was estimated to have tripled to US$1.2 trillion between 2012 and 2022. The 2022 UBS Global Family Office states that 27 per cent of the investors are taking on private debt, up from eight per cent in 2017. With the appetite for private credit among family offices set to rise, private credit will be an up-and-coming asset class in increasing interest rates and surging inflation. Furthermore, venture debt may be at the heart of the private credit market in Asia as it continues to attract attention from investors keen on investing in early stage companies – US$12.1 billion was disbursed in 2021, four times the 2018 level of US$3.2 billion.
Closer to home, Mr. Lim Cheng Khai, Executive Director, Financial Markets Development Department, Monetary Authority of Singapore, said in a speech that the Asian private credit market has grown by almost 30 times in the last two decades, from only US$3.2 billion in 2000, to over US$90 billion in June 2022.
The Federal Reserve will continue to raise interest rates in 2023 to re-normalise interest rates in the coming years. Private credit has emerged as a critical source of financing following the Global Financial Crisis as banks pulled back from issuing loans to private companies due to increased regulation.
Today, Alta is creating access to the widest array of alternative assets in the region, while enhancing liquidity in traditionally illiquid markets. Most recently, Alta has partnered with Hamilton Lane to enable pan-regional market access to a senior private credit fund available on Hamilton Lane’s Evergreen Platform. According to Hamilton Lane’s report, senior credit “can offer a favorable level of volatility and risk/return measurement” compared to other private credit indexes, offering a compelling opportunity to investors in the region considering various options for investing in private credit.
Moving forward, Alta will look to strengthen its commitment to revolutionize private markets access and liquidity in the region. Over the next few months, Alta will be launching new products and opportunities across Southeast Asia, bringing its full end-to-end services to some of the fastest-growing markets in the world.
Alta & Aletheia Capital Private Credit Sector Report
Executive Summary – Private credit is an asset defined by non-bank lending where the debt is not issued or traded on the public markets. It is a source of diversification and can provide stable and regular returns.The asset class refers to lending by private investors or organizations. It is different from the lending by traditional financial institutions such as banks. This type of credit typically involves investments in unlisted debt securities or direct lending to borrowers. It may offer higher returns than traditional fixed-income investments, but also carries greater risk.
The risk-return profile of private credit is greater than that of senior debt. The risks are lower than that of equity and equity-linked investments. It provides us with features of both straight equity and debt investment.
Conclusion – The size of the private credit market has tripled to US$1.2 trillion between 2012 and 2022, according to estimates. Private credit may be on a cusp of a further boom in a rising rate and inflationary setting. The asset class may serve its core purpose of superior yields, lower volatility, and diversification. In Emerging Asia, venture debt may be at the heart of the private credit opportunity. We urge investors to consider the range of private credit options as a means of increasing rewards and mitigating risks.
Alta, formerly known as Fundnel, is Southeast Asia’s largest digital marketplace for alternative investments. Alta gives its international investor community direct access to invest and trade in a wide range of curated alternative assets, from direct investment into early to late-stage private companies, PE/VC funds, asset-backed securities of luxury assets, real estate and more. Alta is a complete, end-to-end alternative investment platform, bringing private capital markets, fund management, and exchange solutions under one roof. Through its blockchain-powered exchange, Alta is also able to support tokenization, digital custody, and trading of alternative assets. Since 2016, Alta has completed over 1,500 transactions valued in excess of US$600 million and has created access for investors to invest in over US$22 billion worth of mandated opportunities globally. Alta is headquartered in Singapore and operates several offices across Southeast Asia. Visit Website: Alta
About Aletheia Capital
Alētheia Capital is Asia’s Largest Independent Investment Advisory Firm. It is rated as Asia’s No. 1 Independent Investment Research Firm by Institutional Investor. The firm services 2500 clients managing over $15tn in assets under management. It has licensed presence in Asia Pacific, Europe and the US. Alētheia Capital’s team includes over 50 analysts and strategists. The research team includes some of the highest rated in the industry. There are 11 product marketing managers. The firm covers 670 stocks in Singapore, Hong Kong, China, Thailand, Indonesia, Taiwan, India, Philippines & Malaysia. Aletheia’s coverage has a strong Tech focus.