Singaporean sovereign wealth fund GIC Pte is shifting money toward private credit, betting tighter lending from banks will convince companies to pay more for the capital they need to run their businesses.
(Bloomberg) — Singaporean sovereign wealth fund GIC Pte is shifting money toward private credit, betting tighter lending from banks will convince companies to pay more for the capital they need to run their businesses.
GIC chief investment officer Jeffrey Jaensubhakij said private credit — the business of non-banks lending directly to companies — is an asset class that currently offers the “most attractive” risk-reward profile. Rising interest rates are pushing up returns while the types of deals being done tend to be for companies with higher quality cashflows.
“The opportunity set today is in private credit, and we have assets from which we can move to invest in that,” Jaensubhakij said in an interview. “Being able to lend — let’s say into private credit senior secured at double-digit type of levels — means that there are good alternatives that are generating good returns.”
Private credit is currently one of most popular asset classes, with global assets under management growing to $1.5 trillion, according to financial data provider Preqin Ltd. The loans typically feature floating interest rates, which means investors get paid more when rates rise.
GIC on Wednesday reported its worst annualized five-year returns since 2016, citing a slowing global economy, and said the consequences of rising interest rates are yet to fully play out.
That concern has helped drive rising investments in private equity, infrastructure and real estate. The wealth fund doesn’t release its assets under management, but had been estimated to run $690 billion, according to the Sovereign Wealth Fund Institute.
“For private equity, anyway we’re not selling anything – the environment isn’t great for selling anything right now,” GIC’s Jaensubhakij said. “But as seller’s expectations come down there will be opportunities opening up to add.”
(Corrects fourth paragraph of story published July 26 to show that the $1.5 trillion figure for private credit refers to assets under management worldwide)
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