Goldman Sachs and Mubadala Investment, an Abu Dhabi sovereign wealth fund, have announced plans to invest $1 billion in private credit deals within the Asia-Pacific region. The signed agreement entails deploying long-term capital to support "high-quality companies and sponsors" across various Asia-Pacific markets, with a particular emphasis on India, as per a statement from Goldman Sachs.
“The opportunity in private credit in Asia-Pacific is expansive", said Greg Olafson, global head of private credit at Goldman Sachs Alternatives, part of the bank’s asset management arm. “With strong economic growth in the region and favourable conditions for private lenders to support the growth of leading companies by providing flexible, long-term capital, we believe we are at the early stages of a defining era for private credit in Asia-Pacific".
Over the past decade leading up to 2022, the private credit market in the region has expanded significantly, growing 3.5 times to reach $81.3 billion. Projections from data provider Preqin suggest it is poised to surpass $100 billion by 2027. Despite this growth, the Asia-Pacific region only represents approximately 5.5 percent of the global $1.5 trillion private credit market. Investors are increasingly drawn to private credit as they seek higher returns, particularly amidst subdued activity in equity and bond markets due to prevailing high-interest rates. Simultaneously, companies are increasingly opting for this avenue for fundraising, responding to reduced bank lending and the demand for adaptable financing solutions.
“The diverse and rapidly growing economies, as well as the increasing private equity deal volumes, are significantly driving demand in Asia-Pacific for customized credit solutions from non-traditional lenders", said Omar Eraiqat, deputy CEO of diversified investments at Mubadala. “This partnership with Goldman Sachs complements our aspirations to grow our private credit exposure in [Asia-Pacific], a region that is central to Mubadala’s strategic growth initiatives".
With a portfolio valued at US$276 billion, Mubadala's interests extend across six continents, encompassing various sectors and asset classes. This diversification aligns with its efforts to bolster the United Arab Emirates' economy, following the government's initiatives. Notably, China has emerged as a significant focus area for Mubadala, reflecting the strengthening relations between the Middle East and the Asian powerhouse.
With a keen focus on such prospects, international banks are broadening their presence in the Middle East and North Africa region as well. In the previous year, Goldman Sachs inaugurated an office in the Abu Dhabi Global Market, which serves as the international financial hub of the UAE's capital. Goldman Sachs will oversee the recent $1 billion partnership through local teams situated in Asia, supported by a global private credit team consisting of 165 credit investment experts managing assets worth $110 billion.