KKR targets December close for second Asia private credit fund

Asian borrowers remain highly price-sensitive, often opting for bank loans that are typically 200 basis points to 400 basis points cheaper than private debt

KKR is aiming to close its second Asia-focused credit fund in December and is targeting around US$2 billion, according to sources familiar with the matter.

Asia Credit Opportunities Fund II, which started fundraising in January 2024, is a performing credit fund aiming to deploy capital for deals yielding low-to-mid-teens, said the sources familiar who declined to be identified discussing private matters.

A spokesperson for KKR declined to comment.

KKR’s fundraising initiative underscores how global asset management firms are piling into private credit in Asia, as investors remain bullish on a region that represents just a fraction of the burgeoning US$1.7 trillion global private debt market.

Asia Pacific’s private credit market is projected to grow to US$92 billion in 2027 from US$59 billion last year, a 16 per cent compound annual growth rate, according to an industry report last month. This is driven by strong demand from institutional and wealth investors seeking yield and diversification, the report added.

Despite the growth potential, the asset class continues to face competition from traditional lenders in Asia. Asian borrowers remain highly price-sensitive, often opting for bank loans that are typically 200 basis points to 400 basis points cheaper than private debt. Beyond pricing, financial institutions offer a suite of comprehensive services – including cash management, revolving credit lines and transaction banking – that private credit firms struggle to match.

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KKR oversees US$315 billion in credit assets globally including liquid strategies, as at September, according to its website. The New York-based firm has been expanding its private debt footprint in Asia, hiring its first Japan private credit specialist earlier this year and completing deals in Australia and India in recent months.

In 2022, KKR raised US$1.1 billion for its inaugural Asia-Pacific credit fund, with more than half of the capital coming from the region. BLOOMBERG

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