In today’s fractured global economy defined by geopolitical rebalancing, compressed exit timelines, and a more complex monetary landscape, private credit has rapidly evolved from a niche allocation into a strategic core for institutional and family office portfolios. But beyond its return and diversification characteristics, we see private credit as a catalyst, a tool to shape the real economy, fund infrastructure resilience, and enable transitional growth in ASEAN and other emerging markets.
A Structural Rethink in Capital Deployment
Private credit, broadly defined as non-bank, privately negotiated loans, now represents a $1.7 trillion global market, projected to reach $2.8 trillion by 2028, according to Preqin’s 2024 Global Private Debt Report.
Originally viewed as a workaround to post-GFC bank retrenchment, it has since matured into a mainstream pillar of capital markets. The asset class has grown not just in size, but in strategic relevance, as investors seek yield, protection, and uncorrelated performance.
In Southeast Asia, the opportunity is particularly acute. Many mid-market companies and infrastructure sponsors are caught in a financing gap: too large for microfinance, too complex for traditional bank loans, and too early or illiquid for equity investors. This is where private credit becomes not just relevant, but essential.
Why the ASEAN Opportunity Is Different
ASEAN is home to over 650 million people, a fast-growing middle class, and some of the world’s most ambitious infrastructure and sustainability goals. Yet, capital mobilization remains fragmented.
The Asian Development Bank (ADB) estimates an annual infrastructure financing gap of $210 billion in developing Asia, including ASEAN.
Private credit has the flexibility to step in, from growth lending to mezzanine infrastructure financing, while structuring protections and covenants tailored to local market nuances. Private credit, when executed with discipline and purpose, can unlock transition-aligned growth across sectors like:
- Renewable Energy & Grid Modernization
- Green Building Materials & Decarbonization
- Industrial & Logistics Infrastructure
- Waste-to-Energy and Circular Economy Projects
Unlike blind-pool funds or syndicated instruments, direct private credit allows for deep due diligence, bilateral structuring, and embedded ESG oversight, all critical for the region’s long-term sustainable development.
Beyond Yield: A Multi-Dimensional Value Proposition
Private credit is celebrated globally for its higher yields, capital preservation via downside protection, and performance smoothing due to infrequent mark-to-market volatility.
According to the BlackRock 2025 Global Family Office Report, 32% of global family offices plan to increase allocations to private credit, the highest of any alternative asset class. Some have already allocated 15–30% of their total AUM to the strategy.
However, we believe this is only half the story. The next frontier is purpose-driven private credit, deploying capital where it catalyzes structural change. In emerging markets like Indonesia, Vietnam, or the Philippines, return and impact are not a trade-off, they are increasingly interlinked.
Local sponsors and operators need patient, flexible capital. Private credit offers this while allowing investors to:
- Price risk dynamically
- Align repayments with operational cash flow
- Embed ESG milestones or sustainability-linked terms
Crowding, Credit Cycles, and the Case for Selectivity
As capital pours into private credit globally, some markets face crowding risk. The BlackRock survey noted concerns about too many new entrants, weaker documentation, and high fundraising volumes, even among deals that could have otherwise accessed public debt. That’s why selectivity and specialization are critical.
Private investors must be highly selective, focusing on sectors where they can bring deep operating experience and can conduct fundamental, bottom-up underwriting. They usually co-structure deals for long-term alignment and seek partners pursuing industrial transformation through energy efficiency, localization, and responsible supply chains.
Private investors usually have spanning real asset operators, public-private platforms, and sustainability alliances, including:
- Policy shifts and regulatory tailwinds
- Community acceptance and license-to-operate
- ESG transition benchmarks
Credit as a Tool for Climate and Transition Finance
One of the most underserved and urgent use cases for private credit is in transition finance especially for hard-to-abate sectors like steel, cement, chemicals, and transport.
According to the Glasgow Financial Alliance for Net Zero (GFANZ), global transition finance needs could exceed $100 trillion through 2050. Private credit can accelerate this transition through:
- Sustainability-linked loans with KPI-based pricing
- Bridge financing for early decommissioning of high-emission assets
- Capex support for energy-switching and digital upgrades
This aligns with blended finance strategies where concessional capital from DFIs de-risks private investment—a mechanism actively promoted by the Asian Development Bank.
Final Thoughts: The Power of Purpose-Aligned Capital
Private credit is no longer just about extracting yield, it is about engineering solutions. In a world where exit timelines are uncertain and transformation is non-negotiable, credit is the new equity, but with structure, stability, and sustainability built in.
Gunung Capital is a private investment firm focused on sustainable infrastructure, industrial transformation, and impact-linked growth in Asia. We deploy capital where operational change meets structural opportunity.
