SBAI Singapore Institutional Investor Workshop 2025

We've been in this industry long enough to know that when something gets popular fast, cracks are bound to show up sooner rather than later....

At the SBAI Singapore Institutional Investor Workshop, we spent an hour discussing whether private credit was in crisis. The headlines are noisy. Most of the bad press is about US Business Development Companies. These are the listed, retail-facing (or should we say retail accessible) slice of the market that was always going to be where cracks showed up first. For now, default rates are still broadly low, sitting around 2% with some upward drift toward 5% expected. That's not 2008, where we saw 15–20%. So no, this is not yet a systemic crisis.

But don't use that as a reason to relax. The structural deterioration from years of cheap money is real: covenants that barely exist, loan durations that have stretched, and a lot of high-yielding paper backed by enterprise value in software and healthcare businesses priced for a world that may no longer exist. The cash flows underpinning some of that debt are genuinely uncertain and many investors haven't fully come to terms with that yet.

But, there is opportunity in the stress. Some opportunistic closed-ended funds are acquiring positions at around 30% discounts. If you can do the work, this is a compelling entry point. The question is whether you're buying dislocation or impairment. That distinction requires detailed due diligence, not a term sheet review.

Stop confusing "evergreen" with "liquid" — they are not the same thing

This is where we got a bit impatient. The terminology in this market has become genuinely misleading. An evergreen fund tells you about fund life, it's open-ended. Redemptions are conditional, gates are real, and GP discretion is broader than most LPs appreciate until they actually need to redeem.

These Semi-liquid funds hold a buffer of liquid assets to meet redemptions, typically government bonds, broadly syndicated loans. Fine in calm conditions. When markets turn and everyone wants out at once, the manager has to sell the liquid buffer first and often times as a hefty discount. The investors who stay end up with a progressively less liquid portfolio at least temporarily. We lived through exactly this dynamic with hedge funds in 2008. As always, the lesson apparently hasn't fully landed, we humas have this habit of forgetting. But as a conclusion we all agreed that the underlying investments are often not the problem, it's the packaging, and who it's being sold to.

The due diligence basics are being skipped

Investors are so keen om making deals, that often it seems that they are assuming asset existence without verifying it. That sounds absurd, but it's real. There have been documented cases in Asia Pacific of fabricated collateral (loans that didn't exist) where investors simply trusted the paperwork. Onsite visits, direct loan verification, third-party confirmation: these are not sophisticated asks. They're basics. They're just not being done consistently.

Beyond that: the difference between a maintenance covenant and an incurrence covenant is not a technicality. It's the difference between an early warning system and a lock that only triggers after the damage is done. Check whether cash sweep mechanisms are actually in place. Ask how much real negotiating leverage your manager has. A fund in a 20-bank syndicate is in a fundamentally different position from a direct lender who owns the whole loan. Remember that when investing into private club deals.

The valuation number on the page is not what you think it is

Most private credit sits on books at amortised cost. That number doesn't move much until something actually breaks. In a semi-liquid or evergreen structure where redemptions are priced off NAV, the investor who leaves early is effectively subsidised by the investor who stays. This is not a hypothetical, it's a structural feature of how these vehicles work.

Depending on the underlying assets and strategy, independent third-party valuations conducted at a frequency that matches the redemption window should not be a negotiating point. It should be a minimum standard.

Asia is behind the curve — which is both an advantage and a warning

The stress right now is in the US. Asia Pacific has generally handled elevated redemptions more quietly, runoff vehicles rather than hard gates, which avoids forced selling. And because allocations here were smaller to begin with, the exposure is lower. That's the advantage of coming later to a trend.

The warning: the push to democratise private credit and private equity - low minimums, quarterly liquidity windows (Semi-liquids), complex structures marketed to near-retail investors - is already in Asia. Regulators are paying attention.

The principles we agree on are straightforward: favour closed-ended structures, keep semi-liquid exposure genuinely small, if possible do real due diligence rather than trusting documentation, and watch DPI (Distributions to Paid-In capital) above everything else. It's the one number that can't be engineered. If cash isn't flowing the way you were told it would, DPI will tell you before anything else does.

The problem is not that retail has gotten access to private markets. The problem is that private markets are being repackaged into evergreen semi-liquid products that are easy to distribute, easy to believe in, and hard to exit.

A warm thank you to my fellow panellists Tuck Meng Yee (JRT Partners) and Gita Advani (Albourne), and to our moderator Brian Digney (SBAI) for a candid and substantive discussion. The SBAI Singapore Institutional Investor Workshop continues to be one of the more valuable forums in the region for exactly this kind of conversation.

This article reflects my own synthesis of the discussion and was drafted with the assistance of Claude AI. The event was held under Chatham House rules.