The global private credit market currently has no systemic risks,
while Asia offers the biggest growth opportunities, a senior Bain Capital private credit executive told Reuters.
Concerns about weak lending standards in credit markets ha
ve resurfaced after the recent collapses of U.S. auto parts supplie
r First Brands and car dealership Tricolor, with investors focusing on
possible risks in a less-regulated market where companies have borr
owed heavily from alternatives to banks.
U.S. Federal Reserve rate cuts have also triggered questions about narrowing returns in this asset class.
Asia ‘The Clear Winner’ Globally
“Our view is that there is nothing systemically wrong with the market, but that it is a little frothy,” Jeffrey Hawkins
, Bain Capital’s Boston-based deputy managing partner for credit a
nd special situations, told Reuters in Hong Kong after attending the city’s
global financial leaders’ summit this week.
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“There’s a lot of new capital being raised, which creates the need to deploy capital. A big concern in the market
right now is that the amount of money may lead to organizations deploying c
apital more quick
ly, doing less diligence, and perhaps maybe lower spreads,” Hawkins said.
Insurance companies, which have been exposed to more private credit in recent years, are not taking on an eleva
ted level of risk, as their investments, which are typically for long
periods of time, come from their balance sheet withou
t short-term liability, he added.
“Most of the cracks in the market come from asset liability m
ismatches, not from the underlying risk of the product itself,” Hawkin
s said, adding that Bain focuses on the middle-market where the
re is less spread compression due to less competition.
Bain, which has about $58 billion of credit assets under manageme
nt, is eyeing more opportunities in Asia, especially in direct lending w
here traditional s
ources of capital from banks are not widely available, Hawkins said.
“We are very excited about Asia,” he said. “Relative to the U
.S. and Europe as a whole, though there are caveats, the clear w
inner globally, from a growth perspective, is Asia.”
Bain is currently raising an Asia direct lending fund and its third
Asia special situations fund, which offers hybrid capital solutions of bo
th equity and debt to companies, public filings show.
Australia and India are two big markets for Bain in Asia direct lending, Hawkins said, declining to comment on the firm’s fundraising plans.