One of the fastest-growing segments of the financial system, global private credit has grown ten-fold since 2009[1], yet Asia Pacific (APAC) holds only 6.6%[2] of the assets under management.
Considering APAC’s projected 4.4% GDP growth for 2025 versus 2.2% in the US or 1.6% in Europe[3], this imbalance begs the question: will 2025 — the Year of the Snake, symbolising transformation — mark a turning point?
Three converging trends suggest it might: the rise in intra-Asian trade and investment, diversification away from the US (and its rising protectionist sentiment) and the rapid development of smart cities. These dynamics are driving specialised funding needs. Traditional funding sources – bank and equity markets – will require supplementing with more flexible financing, and private credit is best suited to fill this gap.
Geopolitical Uncertainty Boosts the “Asia for Asia” Trend
The onset of Trump 2.0 is causing global uncertainty, especially for economies that are largely reliant on the United States as a trade partner.
While the US was once a critical trading partner to Asia, 57%[4] of all trade in Asia today originates and ends within the region. This growing regional self-sufficiency will likely accelerate over the next few years as Asian personal consumption increases and the threat of US tariffs looms.
Southeast Asia in particular showcases the “Asia for Asia” trend, with nations like Malaysia evolving into a potential offshoring hub and Vietnam leveraging cost advantages to become a preferred “plus one” location.
India, meanwhile, continues its focus on domestic consumption-driven growth.
China’s engagement within APAC is also intensifying, with increased technology and manufacturing collaboration with Australia. China also became Thailand’s largest foreign investor in 2023, with bilateral trade reaching US$126.3 billion[5] between the two nations.
As an example of a value-creative intra-Asia deal, ADM Capital invested in a Vietnamese modular housing manufacturer that supplied affordable housing to New Zealand. This demonstrated the potential for private credit to foster regional economic growth by addressing critical housing needs in one market using affordable modules from another, reducing default risk through collateral in both countries.
The partnership between Singapore-based Temasek’s wholly owned asset management group Seviora and ADM Capital itself is another example of the “Asia for Asia” trend.
Many of these investments are in sectors with attractive growth prospects. Domestic banks and other domestic funding sources are ill-equipped to finance these intra-Asia investments, creating a significant opportunity for private credit, which is often a more cost-effective option for scaling up businesses in assured growth markets.
Successfully structuring intra-Asian deals requires not only financial expertise but also on-the-ground experience to navigate the complex and varied regulatory frameworks across multiple jurisdictions. Strong local relationships with regulators, borrowers and the wider ecosystem remain essential to dealmaking in the region. The next phase of financings will differentiate the winners from the losers.
Investor Need for Diversification Fuelling Asia Private Credit Market
The highly leveraged US private debt market and the prospect of a pause in interest rate hikes are prompting global investors to seek alternatives and diversify risks. APAC’s private credit, underpinned by strong GDP growth, a vast mid-market funding gap and attractive risk adjusted returns, is a compelling option.
This trend is particularly fitting for APAC investors who traditionally invested in US assets. Preqin data shows2 APAC-originated private debt assets grew over 70% from 2020 to 2023 (US$58.2 billion to US$99.3 billion), yet only 4% was allocated to Asia. This suggests significant untapped potential, particularly as APAC (Australia, Singapore, Japan and Korea) and even Middle East investors, who traditionally invested in US and European markets, are expected to redeploy capital to the region.
As APAC becomes more autonomous, its economic cycles will increasingly decouple from the US, Europe and even within Asia itself, offering a degree of insulation in traditional portfolios.
Nonetheless, rising interest rates in many markets have impacted corporate credit quality, underscoring the importance of selective investment. A portfolio with developed (e.g., Japan, South Korea, Singapore) and developing Asian economies (e.g., Vietnam, Indonesia, India) mitigates risks to any single market’s fluctuations.
Rigorous due diligence, focusing on financial health and resilience, is crucial for all investors. Private debt investment opportunities in APAC vary widely from the US’s, and ADM Capital’s investment strategy distinguishes itself from others through its direct deal sourcing, strong covenant protection, lack of leverage, deep borrower relationships and enhanced risk analysis via sustainability integration.
Private Credit to Fund Asia’s Smart Cities
By 2050, urbanisation will add 1.2 billion people to APAC cities, according to the UN Development Programme[6]. Meanwhile, the Asian Development Bank[7] estimates US$13.6 trillion in infrastructure will be needed from 2023-2030 for development, economic growth, poverty reduction and climate change response.
The imperative to adopt sustainable living and business practices while addressing climate change is driving demand for investment in “smart city” initiatives and broader sustainable infrastructure. Smart cities leverage digital solutions to optimise traditional infrastructure and services, promoting sustainability for the benefit of people and businesses through improvements in areas such as energy, transportation, social infrastructure, social services, the circular economy and climate mitigation. As a key small and medium-sized enterprise (SME) financier in APAC, private credit is uniquely positioned to finance these longer-term projects, aligning perfectly with its investment horizon.
Opportunities to fund such projects are plentiful in APAC. A recent survey from the International Institute for Management Development (IMD)[8] business school showed that seven of the world’s top 20 smart cities are in APAC compared to 11 in Europe. Of the Asian smart cities listed, the locations varied across the region from Beijing to Taipei, Singapore, Seoul and Canberra.
In India, ADM Capital plans to finance smart meter production that will enhance the efficiency of electricity consumption tracking and usage in the country. As part of its smart city initiatives, ADM Capital has also invested in innovative services such as a consumer lending platform designed to provide financial inclusion for urban professionals lacking traditional credit histories.
This increasing focus on sustainable and efficient infrastructure and related projects to make Asian cities smarter presents a significant opportunity for private credit investors to support while achieving attractive returns.
Conclusion
Asia’s private credit market stands at an inflexion point. While the region’s economic dynamism and growing need for investment in infrastructure and sustainable development create significant potential, challenges remain.
In an increasingly self-sufficient Asian market, private credit managers who possess strong regulatory expertise, sophisticated structuring capabilities, sharp credit selection skills and robust local relationships will gain a significant competitive advantage.
Despite these challenges, the increasing intra-Asian investments, combined with investors’ need for diversification away from Western markets and the rise of smart cities, suggest that Asia’s private credit market is poised for a period of significant growth, shedding its old skin and emerging stronger and more resilient in the Year of the Snake.
[1] McKinsey: The next era of private credit – (2024)
[2] Preqin: What’s holding back private debt in APAC? (2024)
[3] International Monetary Fund: Real GDP Growth Data Map (2025)
[4] KKR: Private Credit in Asia Pacific: A Region on the Rise (2023)
[5] McKinsey: Asia: The epicentre of global trade shift (2024)
[6] National Data: National Bureau of Statistics of China (2024)
[7] KKR Insights: An Alternative Perspective (2024)
[8] UN-Habitat: Asia and the Pacific Region
[9] Asian Development Bank: Meeting Asia’s Infrastructure Needs (2017)
[10] IMD Smart City Index (2024)
