The Asia-Pacific region accounts for 16% of funds in the private markets, and demand for private credit solutions is on the rise. This growth is driven by small and medium-sized enterprises (SMEs) seeking alternatives to bank loans, and investors looking for risk-adjusted returns and more predictable cash flows. Opportunity in this space has attracted the interest of fund managers in Asia, particularly those engaged in private equity. However, new entrants to the market need to be aware of the unique staffing and operational challenges presented by private credit funds.
While private market managers tend to think about systems and processes first, the critical starting point should be assembling a strong team with credit experience and the ability to make site visits, meet with management teams, assess borrower creditworthiness and understand underwriting. Next, the operational and technology infrastructure should be implemented, tested and proven before approaching investors. These systems need to be flexible, as private credit covers a broad spread from straightforward direct lending to more complex distressed debt. Managers also need to understand and comply with the different regulatory regimes in Asia, including jurisdictions like Singapore, Indonesia, Hong Kong, Malaysia and others.
The many moving parts of private credit portfolios require more operational activity than other fund types. Attention to treasury and cash management, credit instruments with liquidity aspects, different maturity timelines and interest rates, and other considerations necessitate a systematic means of tracking cash and other data. Choose a system that can adapt to differences in accounting for capital reinvestments and investor distributions.
Adding a new asset class to your existing product mix is a good opportunity to reevaluate your technology. Many legacy systems are inadequate for supporting debt portfolios, and a new, cloud-based technology infrastructure enables you to gain scale and flexibility. Newer technology also positions you to better meet investor expectations, who look for transparency and granular reporting. Choosing the right fund administrator can help you achieve your technology and infrastructure goals, as well as provide the legal structure and standard documentation that investors need.
SS&C is the world’s largest fund administrator and a leading provider of outsourced technology and operational services for the global investment management industry. Our cloud-based infrastructure supports the full range of alternative investments, including private credit, private equity, hedge funds, funds of funds, real estate, real assets and direct investments.
To learn more about the unique operational challenges of launching a private credit fund in Asia, and how SS&C can help, download our "Establishing and Managing a Private Credit Fund in Asia" whitepaper.