Goldman Sachs and Abu Dhabi's Mubadala sign US$1 billion private credit deal with eye on Asia-Pacific
Goldman Sachs and Mubadala Investment, an Abu Dhabi sovereign wealth fund, will deploy US$1 billion in private credit deals in the Asia-Pacific region to capitalise on the fast-growing opportunities in this asset class.
The two firms signed an agreement on Monday, which will see them lend long-term capital to "high-quality companies and sponsors" across multiple Asia-Pacific markets with a focus on India, according to a statement from the US investment bank.
"The opportunity in private credit in Asia-Pacific is expansive," said Greg Olafson, global head of private credit at Goldman Sachs Alternatives, part of the bank's asset management arm. "With strong economic growth in the region and favourable conditions for private lenders to support the growth of leading companies by providing flexible, long-term capital, we believe we are at the early stages of a defining era for private credit in Asia-Pacific."
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The region's private credit market has grown 3.5 times in the 10 years to 2022 to US$81.3 billion and is expected to top US$100 billion by 2027, according to data provider Preqin. However, Asia-Pacific accounts for only about 5.5 per cent of the US$1.5 trillion private credit market globally.
Investors are flocking to private credit eyeing higher returns at a time when equity and bond markets remain muted because of the high interest rate environment. Meanwhile, companies are increasingly turning to this fundraising channel amid scaled-back bank lending and the need for flexible financing solutions.
"The diverse and rapidly growing economies, as well as the increasing private equity deal volumes, are significantly driving demand in Asia-Pacific for customised credit solutions from non-traditional lenders," said Omar Eraiqat, deputy CEO of diversified investments at Mubadala.
"This partnership with Goldman Sachs complements our aspirations to grow our private credit exposure in [Asia-Pacific], a region that is central to Mubadala's strategic growth initiatives."
Mubadala has a US$276 billion portfolio that spans six continents, with interests in multiple sectors and asset classes as it continues to diversify the economy of the United Arab Emirates following its government's lead. As a result, China has been a focal point amid its warming ties with the Middle East.
With an eye on such opportunities, international banks too are expanding in the Middle East and North Africa region. Last year, Goldman opened an office in Abu Dhabi Global Market, the international financial centre of the UAE's capital.
Goldman will manage the latest US$1 billion partnership via on-the-ground teams in Asia and a global private credit team comprising 165 credit investment professionals and US$110 billion in assets under management.
It follows a similar pact Goldman struck with the Ontario Municipal Employees Retirement System last September to invest in Asian private credit.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.
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