(Bloomberg) — Private bankers across Asia are scrambling to contain client anxiety as redemption pressures ripple through the $1.8 trillion private credit market, even in a region seen as more insulated from the recent turmoil.
With investment funds’ gating mechanisms suddenly in focus, private bankers in Hong Kong and Singapore have been fielding urgent calls from their high net-worth clients seeking clarity or asking to redeem positions on the private credit products they hold, according to people familiar with the matter. Regulators in Asia are also increasing scrutiny of the asset class, aiming to protect less-savvy individual investors, who tend to be more sensitive than their institutional peers and easily rattled by negative headlines.
“Many wealth investors had never experienced a redemption queue before this cycle,” said Kher Sheng Lee, co-head of Asia Pacific at the Alternative Investment Management Association. The rapid adoption of private credit products by individuals outpaced their practical familiarity with how illiquid structures behave under stress, making it essential for fund managers, distributors and investors to bridge that knowledge gap, he said.
A few high-profile blowups in the US and Europe of companies that were financed by private lenders have eroded investors’ confidence. Concern about US private credit funds with exposure to the software sector — now under pressure from rapid advances in AI — have fueled withdrawals at vehicles run by BlackRock Inc., Blackstone Inc. and Blue Owl Capital Inc. Morgan Stanley and Cliffwater LLC capped redemptions at their multibillion-dollar funds after clients sought to pull out far more than is allowed. JPMorgan Chase & Co. also restricted some lending to private credit funds after marking down the value of certain software-linked loans in its portfolios.
In Asia, asset managers including Blue Owl, Blackstone and KKR & Co. have hosted in‑person events with private bankers in Hong Kong and Singapore — ranging from casual drinks to formal luncheons to calm investors’ nerves, the people said, who asked not to be identified discussing private matters. Blackstone also held Zoom calls with select retail clients to reassure them that its exposure to stressed software assets is limited compared with peers, one of the people said, adding that the firm has sufficient cash on hand to meet redemption requests.
The Hong Kong Monetary Authority has contacted private banks to assess the private credit funds they are distributing and the scale of those exposures, people familiar said. The Australian Securities & Investments Commission has boosted surveillance of private markets since last year.
A representative for Blue Owl said the firm regularly engages with distribution partners and clients worldwide as part of its normal course of business. The company added that Asia remains an important growth market, with strong demand from both institutional and private wealth investors across its global platform.
“Education and ongoing engagement with financial advisers and investors are central to our approach to private wealth,” Jacqueline Zhuang, head of KKR’s global wealth solutions for Asia Pacific ex-Japan. The firm will continue to support financial advisers and their clients as the asset class continues to grow, she added.
A representative for HKMA said the institution doesn’t comment on market rumors, while Blackstone declined to comment.
Déjà Vu
Most private credit products are only available to professional investors — defined as those with portfolios of at least HK$8 million ($1 million) in Hong Kong, or accredited investors in Singapore exceeding S$1 million ($781,050) in financial assets, according to Endowus, an independent wealth and fund platform. Global funds typically distribute these products in Asia through private banks.
In recent years, global asset managers have raised billions of dollars for private credit funds from the wealth channel. Retail investors currently account for about $48.8 billion of the asset class in Asia Pacific, a figure projected to rise to $74.8 billion by 2028, according to data provider Broadridge Financial Solutions.
For some in Asia, the latest jitters feel like déjà vu. Individuals in the region were burned by the wipeout of the so-called Additional Tier 1 notes during Credit Suisse’s 2023 rescue and by the collapse of Lehman Brothers mini‑bonds in 2008. More recently, the downturn in China’s property and tech sectors has left them especially quick to react to signs of instability.
It’s also not the first time Asia’s wealthy have rushed to redeem funds despite withdrawal limits. In 2022, Blackstone limited redemptions from its real estate fund after heavy requests, much of them from Asia. That episode made high net-worth individuals, family offices and advisers more cautious about tying up money in assets that are hard to trade or value. That said, confidence was later rebuilt when the University of California committed $4 billion to the fund.
Some bankers in Asia now point to that case when trying to reassure clients, people familiar said. The idea behind limiting redemptions is to avoid a vicious cycle where funds are forced to sell assets cheaply to meet withdrawals, which hurts remaining investors and prompts even more exits, they said.
Wealth investors account for roughly 20% of US evergreen funds — an open-ended investment vehicles with no fixed maturity — that had $500 billion in assets under management as of Sept. 30, according to MSCI Research. Among such investors in these funds, about half of their assets are allocated to private credit, highlighting a structural shift beyond a purely institutional base, it added.
Still, some banks and investment committees are playing it safe, allowing clients to redeem early in case requests later hit the cap, the people said. Also, not all private bank clients are backing away from the asset class. Some have asked to shift into instruments with less exposure to US markets and software companies, they added.
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