KUALA LUMPUR, Sept 8 (Bernama) -- Bursa Malaysia closed almost flat on Tuesday as buying interest rotated away from index heavyweights towards smaller-cap construction stocks, with sentiment affected by geopolitical uncertainty, said an analyst. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) eased 0.39 of a point to 1,714.40 from Monday’s close of 1,714.79. The benchmark index opened 1.65 points lower at 1,713.14 and moved between 1,710.44 and 1,714.50 throughout the trading session. The broader market was almost evenly balanced, with decliners leading gainers 548 to 546, while 598 counters were unchanged, 1,107 were untraded and 25 were suspended. Turnover expanded to 4.13 billion units valued at RM3.14 billion from 3.60 billion units valued at RM2.45 billion on Monday.
The private debt industry, valued at $1.7 trillion (RM7.34 trillion), is facing a plateau in growth from its traditional source of funds—institutional investors like asset managers and pension funds, according to data from PitchBook. Money raised through funds targeted to institutional investors is expected to remain flat this year compared to last, prompting private credit investors to seek new growth avenues.
Shift from Traditional Funding Sources
Investment in traditional closed-end vehicles, also known as drawdown funds, has steadily declined since 2021 and is anticipated to remain flat. With central banks likely to cut interest rates soon, the appeal of private debt, primarily comprising floating-rate instruments, has diminished.
In the first half of this year, only 59 traditional funds focused on private debt were closed, down from 68 during the same period in 2023, and fundraising volume fell to $90.9 billion from $98.9 billion over the same timeframe.
“You are starting to approach the limit of the traditional drawdown institutional end market,” said Tim Clarke, co-author of the PitchBook report. He noted that the data surrounding private credit can be limited and unreliable due to the opacity of the product.
Exploring New Growth Channels
To compensate for the stagnant growth in traditional funding, private credit firms are turning to vehicles designed to attract retail investors and insurance companies. Some of these vehicles are open-ended, evergreen funds, which offer more flexibility, allowing investors to periodically withdraw or contribute new capital.
Major players like Apollo Global Management Inc, BlackRock Inc, and Goldman Sachs Group Inc have started raising funds from retail investors in the US, with Goldman Sachs and Carlyle Group Inc also venturing into the European market. Apollo has gone a step further, launching a private credit-focused exchange-traded fund (ETF) in collaboration with State Street Corp.
Role of Insurance Companies and New Fund Structures
Insurance companies have emerged as a significant source of capital for the private credit industry, although many have moved away from traditional drawdown funds. Some private credit funds have attracted insurance money by managing their assets; for example, Blue Owl Capital Inc acquired Kuvare Asset Management in July, gaining control of $20 billion in assets under management. Other insurance firms are investing through separately managed accounts—specialized one-investor funds that offer lower fees and more bespoke investment options.
Non-traditional fund structures like evergreen vehicles often come with lower fees. Managers like KKR & Co and Carlyle have even removed the carry, a performance fee, from recent evergreen funds. There is also considerable pressure on managers of business development companies (BDCs) to reduce fees.
Conclusion
As growth from traditional capital sources stagnates, the private debt industry is exploring new avenues, including retail investors, insurance companies, and innovative fund structures, to sustain its expansion in a changing economic landscape.
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