DB INVESTMENT Partners is building up its private-credit team in Asia, citing the region’s attractive growth potential and relatively young population.
The investment manager owned by Deutsche Bank hired industry veteran Dhruva Agarwal from BlackRock this month to run its India business, and it’s looking to add another executive in June to bring its Asian team to five, according to chief executive officer Raheman Meghji. The firm is focusing on opportunities in the region that range from US$15 million to US$150 million, with a target return in the mid-teens, he said.
There will be plenty of private-credit opportunities in Asia as the “young population will drive demand for insurance, consumer lending, aviation, transportation, among others”, London-based Meghji said. “The region is very important to our strategy.”
The US$1.7 trillion global private-credit market is fast becoming a serious rival to mainstream lending by offering higher, floating rates of return. While Asia-Pacific’s share of the global market remains relatively small, its growth is now outpacing that of other regions, according to an analysis from HSBC Holdings.
DB Investment was set up in September to provide institutions and high-net-worth clients with an avenue to pursue private-credit opportunities. The firm said its focus areas include renewable finance, energy transition and infrastructure financing.
Deutsche Bank is not the only company building up its private-credit business in Asia. Goldman Sachs obtained US$1 billion from Abu Dhabi sovereign wealth fund Mubadala Investment in February to pursue such deals in the region. France-based asset manager Tikehau Capital SCA announced its first private credit fund in Asia in partnership with Singapore’s UOB-Kay Hian Holdings in the same month.
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DB Investment sees some of the best Asian opportunities in areas such as healthcare, digital infrastructure, and energy transition, Meghji said.
The largest markets for private credit in Asia are currently India and Australia, which have good deal flow but also “a lot of capital chasing” those opportunities, he said.
Indonesia is “potentially interesting” given its population dynamics and underlying economic growth story, according to Meghji, adding that the investment manager is also looking at Japan where the private-credit sector is still relatively undeveloped.
The firm is currently in discussion with investors, Meghji said, but declined to provide any details.
One of the company’s key competitive advantages is that it’s part of the global Deutsche Bank group, according to Meghji. “Other partnerships between banks and private credit funds are aiming to get to what we already have, and I think what we have here is very hard for someone else to replicate,” he said.
In Europe, DB Investment has six investment professionals with more hires joining over the coming months. The company has decided against putting together a team in the US in the short term.
“The market in the US is deeper, more mature, and as a consequence, extremely transparent, and private-credit opportunities don’t exist in the same way,” Meghji said. “We see significant opportunity in the more fragmented and less developed markets of Europe and Asia.” BLOOMBERG
