Fundraising and investment activity in private credit across the Asia-Pacific region is set to decelerate over the coming 12 to 18 months, according to Moody’s Ratings. Persistent macroeconomic challenges, ongoing geopolitical tensions, and elevated interest rates are cited as contributing factors reducing investor interest in illiquid alternative assets.
Heightened redemption requests experienced by global private credit funds have led to increased scrutiny over liquidity provisions, potentially reducing the pace of new capital flows into Asia-Pacific from retail and wealth management clients.
Moody’s analyst highlighted that the volume of withdrawal requests—particularly from affluent retail investors in U.S.-based private credit funds—continued to rise into the second quarter, often outpacing those seen in earlier months.
Despite these pressures, Moody’s believes core demand for private credit in Asia-Pacific is likely to remain solid. The report points to ongoing economic growth in the region and a contraction in bank lending for higher-risk and more capital-intensive deals as ongoing drivers for private credit uptake.
Additionally, Moody’s noted that Asia-Pacific private credit markets tend to have lower exposure to retail-driven structures and sector-specific vulnerabilities compared to other markets, which could provide some insulation from current outflows.
Several new regional private credit funds are seeking capital, including a $1 billion offering from Varde Partners LP. However, regulatory changes and stronger investor protection measures, especially for products sold to retail investors, are expected to extend fundraising periods and limit capital raising potential in these channels.
Nevertheless, Moody’s expects structural funding gaps in Asia-Pacific to continue fueling long-term growth for the sector. While the report anticipated that Asia-Pacific private credit assets under management will expand at a faster pace than those in the U.S. or Europe when excluding currency effects, total market size is projected to remain comparatively smaller.
