In a recent PEI Private Credit article, Fi Dinh, our head of Fund Finance, APAC, shared her perspective on the fund finance market’s relationship-driven origins and emerging areas of opportunity across APAC.¹ Building on that discussion, Fi takes a closer look at this evolution for MUFG Alt Insider. Her three insights below explore its continued development and why APAC should not be viewed as a single, uniform market.
1. APAC fund finance has become more sophisticated and institutional, while retaining characteristics of its origins.
Fund finance in APAC originated as relationship-based lending. Early liquidity was typically provided through relatively straightforward bilateral facilities with relationship banks and lighter documentation than is typical today. As global and local managers raised larger funds across APAC and international banks entered the market to diversify their portfolios, financing increasingly involved multiple lenders and more standardized documentation.
NAV financing has deeper regional roots than some may realize, with early NAV-style financing often provided by family offices and boutique investment firms.
2. A borrower’s market requires disciplined underwriting.
APAC’s bank liquidity and emphasis on broader relationships have created a competitive, borrower-friendly fund finance market.
While pricing has moved closer to US and European levels, regional differences remain and disciplined underwriting continues to be essential. For subscription line underwriting, market participants often consider not only contractual commitments but also factors relevant to capital-call performance, including the LP/GP relationship, the manager’s track record, asset performance, and the increasingly complex capital waterfalls of fund structures. Managers may also consider lender-specific factors, including economics, experience through cycles, underwriting expertise, execution capabilities, and ability to support financing throughout the fund lifecycle.
3. A regional approach cannot fully account for the differences among markets.
Individual APAC markets have distinct investor bases and financing needs. Products normally do not emerge in the same order nor serve the same purpose across jurisdictions. For example, Australia is an investor-led market where domestic funds are frequently backed by superannuation funds and NAV financing is well established. In Japan, subscription, hybrid and NAV financing have all quickly developed in parallel over recent years while in Korea, there is a growing interest in exploring these areas of opportunity. Within a few years, India, specifically GIFT city funds, have become an established market for fund finance particularly for subscription line and concentrated NAV financing.
Given varying levels of adoption across APAC, financing arrangements are frequently influenced by each fund’s strategy and applicable regulatory requirements.
Looking Ahead
APAC fund finance is rapidly progressing from relationship-based lending toward a broader and more institutional market. Yet its next phase will remain shaped by the characteristics of individual jurisdictions.
As new opportunities emerge, asset managers will increasingly look for financing partners that understand the nuances of individual APAC markets and can support financing discussions that take account of their funds’ needs.
¹ https://www.pei-privatecredit.com/asia-pacific-is-a-promising-market-for-fund-finance/
