Bain Capital private credit executive brushes off systemic concerns, eyes Asia growth

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By Kane Wu

HONG KONG (Reuters) -The global private credit market currently has no systemic risks, while Asia offers the biggest growth opportunities, a senior Bain Capital private credit executive told Reuters.

Concerns about weak lending standards in credit markets have resurfaced after the recent collapses of U.S. auto parts supplier First Brands and car dealership Tricolor, with investors focusing on possible risks in a less-regulated market where companies have borrowed heavily from alternatives to banks.

U.S. Federal Reserve rate cuts have also triggered questions about narrowing returns in this asset class.

ASIA ‘THE CLEAR WINNER’ GLOBALLY

“Our view is that there is nothing systemically wrong with the market, but that it is a little frothy,” Jeffrey Hawkins, Bain Capital’s Boston-based deputy managing partner for credit and special situations, told Reuters in Hong Kong after attending the city’s global financial leaders’ summit this week.

“There’s a lot of new capital being raised, which creates the need to deploy capital. A big concern in the market right now is that the amount of money may lead to organisations deploying capital more quickly, doing less diligence, and perhaps maybe lower spreads,” Hawkins said.

Insurance companies, which have been exposed to more private credit in recent years, are not taking on an elevated level of risk, as their investments, which are typically for long periods of time, come from their balance sheet without short-term liability, he added.

“Most of the cracks in the market come from asset liability mismatches, not from the underlying risk of the product itself,” Hawkins said, adding that Bain focuses on the middle-market where there is less spread compression due to less competition.

Bain, which has about $58 billion of credit assets under management, is eyeing more opportunities in Asia, especially in direct lending where traditional sources of capital from banks are not widely available, Hawkins said.

“We are very excited about Asia,” he said. “Relative to the U.S. and Europe as a whole, though there are caveats, the clear winner globally, from a growth perspective, is Asia.”

Bain is currently raising an Asia direct lending fund and its third Asia special situations fund, which offers hybrid capital solutions of both equity and debt to companies, public filings show.

Australia and India are two big markets for Bain in Asia direct lending, Hawkins said, declining to comment on the firm’s fundraising plans.

(Reporting by Kane WuEditing by Mark Potter)