From niche to mainstream: The rise of private credit in Asia

Direct lending and infrastructure debt are two of the most compelling sub-sectors in private credit, potentially offering attractive risk-adjusted returns, strong cash yield, portfolio diversification and resilience against market volatility.

These qualities are particularly appealing to Asian investors, who are navigating shifting macroeconomic conditions, regulatory changes and an increasing demand for stable income.

As global interest in private credit accelerates, Asia’s contribution, both in terms of capital and investor engagement, is becoming increasingly prominent. This reflects the region’s appetite for innovative investment solutions and the growing sophistication of its insurance and pension sectors.

Direct lending vs infrastructure debt: A comparison

Direct lending involves providing loans directly to mid-market and large-cap companies, bypassing traditional banks. These senior secured, floating-rate instruments usually mature in under five years. Investors are compensated with a premium for accepting illiquidity and complexity, and direct lending funds span a broad range of sectors, including business services, healthcare, technology and consumer products.

In contrast, infrastructure debt finances large-scale, essential assets such as roads, bridges, utilities, renewable energy projects and digital infrastructure. These loans are often longer-dated (up to seven years), secured by tangible assets and supported by long-term contracts or regulatory frameworks. Infrastructure debt is valued for its predictable, inflation-linked cash flows and lower correlation with economic cycles.

The key differences include:

• Risk profile: Both direct lending and infrastructure debt incorporate robust risk management features. Direct lending benefits from diversified portfolios and strong lender protections, while infrastructure debt is underpinned by asset-backed and covenanted structures, and essential services.
   
• Yield and duration: Direct lending typically offers floating rate assets with competitive yields with shorter duration, whereas infrastructure debt delivers stable returns over longer periods with some assets being fixed rate.
   
• Covenant structure: Infrastructure debt features robust covenants and collateral protections, while direct lending may be more flexible or covenant-lite in upper mid-market / large cap deals.

Trends driving growth

Direct lending: Scaling up and finding value

The global direct lending market has seen explosive growth¹, with assets under management (AUM) reaching new highs as large-cap managers expand their footprint. This expansion is fuelled by:

• Growth of large-cap managers: Leading asset managers are now financing larger transactions, including leveraged buyouts and recapitalisations, often in partnership with banks or as sole lenders.
   
• Bank recalibration: Post-GFC regulations have constrained banks’ ability to hold riskier or longer-duration loans, opening the door for private lenders to fill the financing gap.
   
• Mid-market value: Despite the shift to large deals, the mid-market continues to offer value where lenders can negotiate bespoke terms and capture attractive yields.

Infrastructure debt: Diversification and megatrends

Infrastructure debt is the fastest-growing segment within private credit, with AUM expanding at a compound annual growth rate (CAGR) of 23.1% since 2015 according to Preqin². Its appeal is driven by:

• Diversification benefits: Infrastructure debt exhibits low or negative correlations with other asset classes3 – corporate bonds, equities, real estate – enhancing portfolio resilience.
   
• The “3Ds” megatrends:
  • Digitalisation: Significant investments in data centres, fibre networks and smart infrastructure are driving demand.
  • Demographics: Urbanisation and ageing populations require upgrades in transport, healthcare and utilities.
  • Decarbonisation: The global push towards renewable energy and climate-resilient infrastructure is creating new financing opportunities.
• Bank recalibration: Non-bank lenders are playing a larger role in infrastructure financing, supported by robust regulatory frameworks and strong lender protections, as banks recalibrate their exposure.

Asia’s evolving capital landscape

Asia is becoming an increasingly important source of capital for global private credit funds. According to Coller Capital’s 2025 survey, 50% of the region’s investors plan to increase their allocation to private credit, indicating strong future demand⁴. Several factors underpin this trend:

• Stable income generation: Private credit’s ability to deliver stable, predictable cash flows aligns with the needs of Asian insurers and pension funds, especially amid volatile public markets.
• Rising allocations: Asian institutions have steadily increased allocations to private credit, with direct lending as the primary driver. However, there is a growing shift towards diversification into real assets and asset-backed credit, including infrastructure debt.
• Regulatory tailwinds: Insurance regulators in markets such as Singapore, Hong Kong and Korea are actively considering preferential capital treatment for infrastructure debt. This is making infrastructure debt even more attractive for insurers seeking to optimise their solvency ratios and risk profiles.

Looking ahead: Private credit’s enduring appeal

As base rates remained historically elevated, private credit maintains a strong risk-return profile. Structural trends, including bank retrenchment, infrastructure megatrends and regulatory support, are reinforcing its strategic importance. As Asian investors continue to deepen their allocations and seek greater diversification, direct lending and infrastructure debt are positioned to become cornerstone holdings in their portfolios.

Since 2012, Macquarie Asset Management has established a strong track record in sourcing and managing private credit investments across diverse markets and risk profiles. Leveraging specialist expertise and global relationships, our platform enables us to maximise value and deliver attractive risk-adjusted returns for investors.

For further insights from Macquarie Asset Management, visit macquarie.com/mam.

_Sources:

1. _{PitchBook, August 2024}
2. _{Preqin, June 2024.}
3. _{CFA Institute Research & Policy Center, Infrastructure Debt: Unlocking Investment Opportunities in a Transforming Economy, November 2024}
4. _{Fund Selector Asia, Survey: Asia investors plan to raise private credit allocations, June 2025:}

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