Asia private credit boom brings talent hunt to the fore
Investment managers are employing a variety of methods to bulk up their expertise in private credit as demand soars from institutional investors such as pension funds, insurers and family offices.
Still, finding suitably skilled and experienced candidates poses a challenge even as competition for talent is expected to persist, industry experts told AsianInvestor.
Hiring skilled candidates for private credit is still difficult, said Andrew Tan, APAC CEO of Muzinich & Co, an investment manager that focuses on public and private corporate credit markets.
“Our approach, and it comes from the very top of the firm, is that if you spot talent, and you are able to put them to good use, you get good results so we are always watching out for talent.
Muzinich & Co
"That sits well with our approach to building the business in the Asia Pacific region, which is to have investment boots on the ground and to build for the long-term,” he told AsianInvestor.
Muzinich has eight private credit specialists in the region across Australia, Singapore and Hong Kong.
Apart from direct hiring, some traditional long-only managers also trying up with alternative managers to appeal to a broader range of investors.
The latest in that series is Nikko Asset Management, one of Asia’s largest asset managers with $240 billion in assets under management, finalised a strategic partnership in Asia with Tikehau Capital.
The European asset manager is known for European mid-market private debt and credit secondaries expertise.
Family offices and the debt investment arms of private equity and real estate funds have also hired specialised teams for private credit deals, said Jasmine Chiu, partner for real estate practice at legal firm Mayer Brown.
Mayer Brown
Another example is DB Investment Partners, the private credit investment manager of Deutsche Bank. It has made new hires in Hong Kong in the distressed products group and global credit trading, according to industry insiders.
The investment bank has expanded its mandate to carry out private debt investments in Hong Kong real estate as well as in India, Australia and other regional markets, insiders said.
Another alternative manager, ADM Capital, is adopting a relatively rarer route: it set up an ADM Capital Private Credit Academy in Hong Kong to train management graduates with some work experience.
The academy, set up in October 2023, offers a three-month training and placement program in private credit.
So far, four candidates have been trained and one was hired by ADM Capital.
The goal of the academy is to encourage young people interested in private credit to get a better understanding of the industry.
It also offers the firm, which has increased headcount by about 20% in the past few years, a different outlet to find promising young talent early on.
“It's very rare to find the complete package at junior levels and that is why we are always opportunistic on new talent when we find it," David Whyte, managing director in the Asia-Pacific direct lending team of ADM Capital, told AsianInvestor.
INSTITUTIONAL DEMAND SOARS
Demand for private credit opportunities among institutional investors in the region has soared in recent years.
Investment strategies can range from distressed debt, special situations, direct lending, mezzanine debt and infrastructure debt, allowing private credit portfolios to be customised to meet different investment objectives for investors.
In Asia Pacific, there is a host of boutique asset managers, a diverse group of nimble specialists, operating in alternative investment strategies such as private equity, hedge funds, real estate and infrastructure, that are also looking to expand into private credit, an April 2024 PwC report on private credit in Asia Pacific noted.
Asset managers setting up private credit funds have to consider several issues such as fund structuring, capital and fundraising, pre-investment and sourcing, due diligence and exit strategy.
Along with this, the need to maintain robust risk management and portfolio monitoring practices has also become extremely critical.
Investors have been piling into private debt opportunities. Image credit: ShutterstockSKILLS NEEDED
All of this has boosted demand for candidates with a range of skills from investing to data management.
First of all, candidates need to have solid analytical skills – the ability to analyse an individual credit is at the core of the business – said ADM Capital’s Whyte.
Over time, they also learn the jurisdictional and regulatory differences across the region, he added.
Still, “we don’t have a cookie cutter approach to hiring. We are very open-minded from where we source our talent," he said.
The investment manager strives to get candidates from diverse backgrounds with different ideas, blended with local knowledge of the markets and industries it covers.
“We could, for example, hire people with real estate development experience to help us with loans that incorporate real estate into our underwriting,” Whyte said.
Understanding how to operate in fragmented local markets is also important.
“It’s about having a team that understands local nuances and can handle complexity in structuring deals in the lower mid-market space, which is where we focus," said Muzinich's Tan.
“More broadly there is no question that private credit has grown significantly in the region, particularly in the bigger deal size segment of the market where there is more competition and certainly there's a commensurate focus on talent across the board,” he said.
Still, as he noted, “the key in private, or public credit, is to build a strong and stable core team, and it takes time to put that team together.”
SOFT SKILLS
Apart from technical skills, there are some important soft skills that investment firms are looking for, such as patience, creativity and a hunger to always keep learning.
ADM Capital
“You need an inquisitive mind and be willing to learn. As information is not available publicly, you need to ask more questions about the underlying credit, the market in which the company operates, the competition, the suppliers, etc.,” said ADM Capital’s Whyte.
“Some creativity is also needed – it’s up to us to come up with different solutions to solve company problems with the capital we have.”
The ones who do well in private credit also have a lot of tenacity and patience – and are capable of dealing with sudden changes.
“Often things don't go according to plan and one needs to persevere to get a positive outcome,” said Whyte.
One thing most asset owners and asset managers agree on is that private credit is becoming more competitive.
“There is a lot of capital that needs to be deployed, particularly at the larger ticket size,” said Muzinich’s Tan.
“We’re seeing more interest in the less contested, lower-mid-market private credit space in Asian, US and European private credit.”
“We are also seeing more interest in semi-liquid strategies, which is another space where we have a lot of expertise across our network,” Tan added.
Expect demand for credit specialists to keep ticking along.