INA, AllianzGI deal builds on growing Asian private credit appetite
Indonesia Investment Authority’s (INA) partnership with Allianz Global Investors (AllianzGI) is reflective of growing appetite among asset owners to participate in private credit deals, especially via co-investments that offer greater visibility and control over the funding provided.
From pension funds to insurers and family offices, asset owners in the region have told AsianInvestor that they are keen to invest in or are increasing private credit allocations.
INA, for its part, is also hoping to improve the range of lending solutions for local businesses with this tie-up while generating strong returns.
Through this new partnership with AllianzGI, “INA aims to complement the role of traditional and non-traditional capital providers (i.e. banks, capital markets, private markets) by becoming capital absorbers in market downturns and catalysing growth in up cycles due to our flexible and non-permanent capital nature,” Christopher Ganis, managing director of hybrid capital solutions at INA, told AsianInvestor.
The goal is to “improve the quantity and quality of capital access to underserved segments and opportunities through innovative financing structures across the credit value chain, specifically in secured lending, asset-backed credit (including infrastructure credit) and structured solutions.”
The Indonesian wealth fund, which has about $10 billion in assets under management, and the German asset manager inked a strategic partnership in late September that is centred on co-investment opportunities in hybrid capital solutions.
Both sides aim to invest up to $200 million annually into such solutions, which will act as customised credit solutions for Indonesia businesses.
These hybrid solutions are a response to growing demand for financing not fulfilled by conventional senior bank loans or traditional equity and present attractive private credit plays.
Leading these solutions for INA is Ganis, who is a former BlackRock executive with experience in private credit. He joined the wealth fund in February this year.
INA is widely viewed as a catalytic sovereign wealth fund (SWF), with dual goals of investing to generate returns and also support local economic development by attracting foreign investors as co-investors.
This is INA’s second key partnership with an asset manager this year: it partnered with Manulife Investment Management in February to focus on developing local infrastructure via real estate and natural capital investments.
MORE DEALS TO COME
The SWF has made one hybrid capital solution investment to date – in Traveloka, an Indonesia-based online travel agency, alongside global investment partners.
INA along with BlackRock, AllianzGI and Orion Capital Asia participated in a $300 million financing facility for Traveloka in September 2022.
“The investment was fully monetised this year,” said Ganis, adding that since then, Traveloka has been able to access more traditional capital sources via senior bank loans.
“This serves as an example of our investment thesis that hybrid capital solutions, as flexible capital, is well positioned to act as catalytic capital for companies - which includes leverage to transition to a more permanent part of the capital structure.”
Seeing the value proposition in private credit, INA has built out organic capabilities by developing a dedicated in-house team and collaborating with best-in-class partners, added Ganis.
VARIED INVESTMENT SET
INA expects strong capital demand for growth financing in digital infrastructure, downstream natural resources, healthcare, tourism, and food and agriculture – all expected to attract attention in the incoming administration’s economic policies.
That’s a view shared by Sumit Bhandari, lead portfolio manager of Asian private credit at AllianzGI.
“We see significant opportunities in Indonesia’s middle-market companies, particularly in sectors such as consumer, healthcare, infrastructure (including digital), energy transition, and logistics,” he told AsianInvestor, adding that he envisioned the partnership with INA as a “long-term collaboration.”
The combination of Indonesia's growth potential along with careful risk management, positions investors for favorable outcomes, Bhandari noted.
“We are particularly optimistic about the outlook for corporate capital expenditure in Indonesia, with real gross capital formation expected to accelerate over the next two years.”
“We are also seeing increasing acquisition financing opportunities from sector leaders who are actively pursuing market consolidation strategies.”
CO-INVESTMENTS AND CHALLENGES
Bhandari also noted that there is increasing demand for co-investments from asset owners -- as evidenced by the agreement with INA.
“Co-investments offer greater control and visibility over specific investments.”
Additionally, they enhance the capabilities of asset owners by allowing them to leverage their own expertise alongside that of experienced managers, added Bhandari.
Indonesia has experienced broad-based robust credit growth underpinned by increasing investment and business expenditure, and tightening but stable liquidity reflective of strong domestic credit demand outpacing the growth of onshore deposits, according to banking data.
Yet more improvements are needed to boost private credit investments in Indonesia and even across the region, noted INA’s Ganis.
“The existence of multiple regulatory environments across countries (each with its unique local nuances and dynamic enforcement regimes) requires private credit providers to localise onshore single-market expertise (either organically or through co-investment partnerships); instead of a “one-size-fits-all” regional expansion,” he pointed out.
Asia is also not a homogenous market, and presents different opportunities in different countries, he said, echoing the views of other industry experts that have spoken to AsianInvestor.