𝗧𝗵𝗲 𝗼𝗽𝗽𝗼𝗿𝘁𝘂𝗻𝗶𝘁𝘆 𝗶𝗻 𝗔𝘀𝗶𝗮 𝗽𝗿𝗶𝘃𝗮𝘁𝗲 𝗰𝗿𝗲𝗱𝗶𝘁 𝗶𝘀 𝗻𝗼𝘁 𝗮𝗯𝗼𝘂𝘁 𝘁𝗮𝗸𝗶𝗻𝗴 𝗼𝗻 𝗶𝗻𝗰𝗿𝗲𝗺𝗲𝗻𝘁𝗮𝗹 𝗿𝗶𝘀𝗸 𝘁𝗼 𝗴𝗲𝗻𝗲𝗿𝗮𝘁𝗲 𝗿𝗲𝘁𝘂𝗿𝗻𝘀.

𝗧𝗵𝗲 𝗼𝗽𝗽𝗼𝗿𝘁𝘂𝗻𝗶𝘁𝘆 𝗶𝗻 𝗔𝘀𝗶𝗮 𝗽𝗿𝗶𝘃𝗮𝘁𝗲 𝗰𝗿𝗲𝗱𝗶𝘁 𝗶𝘀 𝗻𝗼𝘁 𝗮𝗯𝗼𝘂𝘁 𝘁𝗮𝗸𝗶𝗻𝗴 𝗼𝗻 𝗶𝗻𝗰𝗿𝗲𝗺𝗲𝗻𝘁𝗮𝗹 𝗿𝗶𝘀𝗸 𝘁𝗼 𝗴𝗲𝗻𝗲𝗿𝗮𝘁𝗲

𝗿𝗲𝘁𝘂𝗿𝗻𝘀. Rather, it lies in being appropriately compensated for disciplined lending in an underserved market. 

As Howard Marks observed, “If we avoid the losers, the winners will take care of themselves,”, and as Charlie Munger noted, “The first rule of compounding: never interrupt it unnecessarily.” In this context, 𝗱𝗶𝘀𝗰𝗶𝗽𝗹𝗶𝗻𝗲𝗱 𝘂𝗻𝗱𝗲𝗿𝘄𝗿𝗶𝘁𝗶𝗻𝗴 𝗲𝗻𝗮𝗯𝗹𝗲𝘀 𝗿𝗲𝘁𝘂𝗿𝗻𝘀 𝘁𝗼 𝗮𝗰𝗰𝗿𝘂𝗲 𝘀𝘁𝗲𝗮𝗱𝗶𝗹𝘆 𝗼𝘃𝗲𝗿 𝘁𝗶𝗺𝗲.

Jamie Dimon’s recent comments in the Financial Times on weakening lending standards and the growing use of payment-in-kind (PIK) structures, where borrowers defer cash payments to lenders, highlight an important 𝘀𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗮𝗹 𝗱𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝗰𝗲 𝗯𝗲𝘁𝘄𝗲𝗲𝗻 𝗨𝗦 𝗮𝗻𝗱 𝗔𝘀𝗶𝗮 𝗽𝗿𝗶𝘃𝗮𝘁𝗲 𝗰𝗿𝗲𝗱𝗶𝘁.

In the US, a crowded and highly competitive market has compressed spreads. To sustain returns, US lenders are increasingly being pushed down the credit curve - 𝘢𝘤𝘤𝘦𝘱𝘵𝘪𝘯𝘨 𝘸𝘦𝘢𝘬𝘦𝘳 𝘤𝘰𝘷𝘦𝘯𝘢𝘯𝘵𝘴, 𝘩𝘪𝘨𝘩𝘦𝘳 𝘭𝘦𝘷𝘦𝘳𝘢𝘨𝘦, 𝘢𝘯𝘥 𝘮𝘰𝘳𝘦 𝘢𝘨𝘨𝘳𝘦𝘴𝘴𝘪𝘷𝘦 𝘢𝘴𝘴𝘶𝘮𝘱𝘵𝘪𝘰𝘯𝘴 𝘢𝘳𝘰𝘶𝘯𝘥 𝘣𝘰𝘳𝘳𝘰𝘸𝘦𝘳 𝘤𝘢𝘴𝘩 𝘧𝘭𝘰𝘸𝘴.

𝗔𝘀𝗶𝗮 𝗽𝗿𝗲𝘀𝗲𝗻𝘁𝘀 𝗮 𝗱𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝘁 𝗱𝘆𝗻𝗮𝗺𝗶𝗰.

Despite contributing over a third of global GDP, Asia accounts for only around 7% of global private credit AUM. With SMEs (that make up over 90% of businesses) facing a significant funding gap as banks pull back lending under tighter regulatory constraints, 𝘁𝗵𝗲 𝗱𝗲𝗺𝗮𝗻𝗱 𝗳𝗼𝗿 𝗱𝗶𝗿𝗲𝗰𝘁 𝗹𝗲𝗻𝗱𝗶𝗻𝗴 𝗶𝗻 𝗔𝘀𝗶𝗮 𝗿𝗲𝗺𝗮𝗶𝗻𝘀 𝘀𝘁𝗿𝗼𝗻𝗴.

This creates a market where 𝗹𝗲𝗻𝗱𝗲𝗿𝘀 𝗰𝗮𝗻 𝘀𝘁𝗶𝗹𝗹 𝗻𝗲𝗴𝗼𝘁𝗶𝗮𝘁𝗲 𝗳𝗼𝗿 𝘁𝗶𝗴𝗵𝘁𝗲𝗿 𝗰𝗼𝘃𝗲𝗻𝗮𝗻𝘁𝘀, 𝘀𝘁𝗿𝗼𝗻𝗴𝗲𝗿 𝗰𝗼𝗻𝘁𝗿𝗼𝗹𝘀, 𝗮𝗻𝗱 𝗵𝗶𝗴𝗵𝗲𝗿-𝗾𝘂𝗮𝗹𝗶𝘁𝘆 𝗰𝗼𝗹𝗹𝗮𝘁𝗲𝗿𝗮𝗹 𝗶𝗻 𝗯𝗲𝘀𝗽𝗼𝗸𝗲 𝘀𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗲𝘀 𝘁𝗼 𝗽𝗿𝗼𝘁𝗲𝗰𝘁 𝘁𝗵𝗲 𝗱𝗼𝘄𝗻𝘀𝗶𝗱𝗲.

Tahan Capital Management Pte Ltd

𝘛𝘩𝘦 𝘪𝘯𝘧𝘰𝘳𝘮𝘢𝘵𝘪𝘰𝘯 𝘱𝘳𝘰𝘷𝘪𝘥𝘦𝘥 𝘪𝘯 𝘵𝘩𝘪𝘴 𝘱𝘰𝘴𝘵 𝘪𝘴 𝘧𝘰𝘳 𝘪𝘯𝘧𝘰𝘳𝘮𝘢𝘵𝘪𝘰𝘯𝘢𝘭 𝘱𝘶𝘳𝘱𝘰𝘴𝘦𝘴 𝘰𝘯𝘭𝘺 𝘢𝘯𝘥 𝘴𝘩𝘰𝘶𝘭𝘥 𝘯𝘰𝘵 𝘣𝘦 𝘤𝘰𝘯𝘴𝘵𝘳𝘶𝘦𝘥 𝘢𝘴 𝘧𝘪𝘯𝘢𝘯𝘤𝘪𝘢𝘭, 𝘪𝘯𝘷𝘦𝘴𝘵𝘮𝘦𝘯𝘵, 𝘰𝘳 𝘱𝘳𝘰𝘧𝘦𝘴𝘴𝘪𝘰𝘯𝘢𝘭 𝘢𝘥𝘷𝘪𝘤𝘦. 𝘈𝘭𝘸𝘢𝘺𝘴 𝘤𝘰𝘯𝘥𝘶𝘤𝘵 𝘺𝘰𝘶𝘳 𝘰𝘸𝘯 𝘳𝘦𝘴𝘦𝘢𝘳𝘤𝘩 𝘢𝘯𝘥 𝘤𝘰𝘯𝘴𝘶𝘭𝘵 𝘸𝘪𝘵𝘩 𝘢 𝘲𝘶𝘢𝘭𝘪𝘧𝘪𝘦𝘥 𝘧𝘪𝘯𝘢𝘯𝘤𝘪𝘢𝘭 𝘢𝘥𝘷𝘪𝘴𝘰𝘳 𝘣𝘦𝘧𝘰𝘳𝘦 𝘮𝘢𝘬𝘪𝘯𝘨 𝘢𝘯𝘺 𝘪𝘯𝘷𝘦𝘴𝘵𝘮𝘦𝘯𝘵 𝘥𝘦𝘤𝘪𝘴𝘪𝘰𝘯𝘴. 𝘗𝘢𝘴𝘵 𝘱𝘦𝘳𝘧𝘰𝘳𝘮𝘢𝘯𝘤𝘦 𝘪𝘴 𝘯𝘰𝘵 𝘪𝘯𝘥𝘪𝘤𝘢𝘵𝘪𝘷𝘦 𝘰𝘧 𝘧𝘶𝘵𝘶𝘳𝘦 𝘳𝘦𝘴𝘶𝘭𝘵𝘴.

 hashtag#PrivateCredit hashtag#AsiaPrivateCredit hashtag#DirectLending hashtag#AlternativeInvestments hashtag#DownsideProtection