Worldwide: Asia-Pacific Fund Finance Market Update

Last Updated: July 11 2017
Article by Jeremy Cross, Michael C. Mascia and Wesley A. Misson

Most Read Contributor in United States, August 2019

On June 19, 2017, the Fund Finance Association (the "FFA") hosted the inaugural Asia-Pacific Fund Finance Symposium at the Four Seasons Hotel in Hong Kong (the "Conference").  Twenty different market participants sponsored the Conference and 247 people attended, including an impressive turn out from private equity fund sponsor ("Sponsors") personnel.  There were multiple panel sessions, covering topics including private equity fund (each, a "Fund") formation, subscription credit facility transaction structures ("Facilities") and forecasts for future market developments.  This article provides a market update of the Asia-Pacific Fund Finance market based on the sentiments expressed at the Conference and our recent practice experiences.

Fund Formation

I.     Defining The Asia-Pacific Market. Defining the Asia-Pacific Fund Formation and Fund Finance Markets has certain gray areas at the margins.  There is a continuum, one side of which is Asia-based Sponsors raising a Fund from Asia-based investors ("Investors") to make investments ("Investments") in Asia.  On the other side, there are United States and European-based Sponsors raising money globally with an Asian Investment component to a global Investment focus.  And there is of course a lot in between.  Additionally, in certain respects, Australia functions as a sub market, with certain distinct characteristics.  Conference panelists for the most part were not concerned with precise parameters, rather just acknowledging the various Asian touch points and acknowledging differences where applicable.  We follow suit here.

II.    Investor Fundraising. Ling Yan Teo, Manager – Asian Fund Managers, at Preqin, opened the Conference with a data presentation derived from her firm's extensive research into private capital in the region.1 While private equity fundraising was somewhat muted the past few years, 2017 is off to a very robust start.  Preqin data shows over $36 billion raised to date in 2017 (already surpassing all of 2016) with an Asia-Pacific Investment focus, a full 11% of global capital raised.  Average Fund size has been increasing significantly in the region since 2015 as well.  Interestingly, buyout and venture capital Funds account for 80% of the Fund formation year to date, with real estate a very distant second.  Infrastructure is another asset class experiencing growth in the region, heavily weighted toward China and India.  But private debt and secondary Funds, while growing prolifically the last few years on a global basis, are surprisingly underrepresented in the region (perhaps signaling opportunity).

Panelists from the various Sponsors at the Conference anecdotally reported a very robust fundraising environment.  Their viewpoints likely contain significant inherent bias – virtually all of the Sponsor panelists were from preeminent, global Sponsors with long track records of successful fundraising and investing.  Many of the local advisors give a more muted outlook, noting that fundraising has been and remains challenging for many Sponsors in the region.

III.  Asia-Pacific Fund Structures. Funds formed by Asia-based Sponsors have traditionally used Cayman Islands vehicles as their preferred entity and that is largely holding true today.  Certain Sponsors have introduced Singapore and Hong Kong vehicles, primarily for local Investors.  Certain global Sponsors have increasingly been trying Luxembourg.  But the Caymans remains the most prominent jurisdiction.  The Australian sub-market often uses an Australian Unit Trust, sometimes for larger Funds in parallel with Delaware and Cayman vehicles.  While the Australian Unit Trust is somewhat unfamiliar outside of Australia, if documented correctly, it is a perfectly viable vehicle for a Facility according to Australian practitioners.  Fund structures are typically co mingled and closed end.  Separately managed accounts are yet to take hold in Asia the same way they have in the United States.

IV.   Investors. While Asian-based Investors have increased over time and are expected to increase further, they are still a disproportionately small percentage of the aggregate Investors in Asia-focused Funds.  Many Asian Investors have well-developed direct investing capabilities in the region, thus reducing their need for local Sponsors.  Sovereign wealth fund Investors are frequent Investors in Asian Funds, often in a flagship capacity.  Having sovereign wealth fund Investors in a lead capacity creates a plethora of challenges for Facility lenders ("Lenders"), from sovereign immunity and aggregate country exposure to concentration excesses and a lack of Investor financial information.  These Investors are increasingly investing in Funds via special purpose vehicles, yet are from time to time less than cooperative with respect to comfort letters and financial statements.

Fund Finance Market

I.     Historically. Historically, the Asia-Pacific Fund Finance market was quite bifurcated.  There were a relative few large, syndicated United States-style borrowing base transactions, predominantly for the Asia-focused Funds of global Sponsors.  And then there was a larger number of smaller, bilateral, bespoke transactions, customized to suit the particular Fund.  These transactions were often structured with a coverage ratio covenant but no individual Investor underwriting, and were often unsecured.  This bifurcation existed meaningfully even three years ago (and in certain sub-markets still exists today).  But the Asia-Pacific market has grown significantly the past few years and a lot of evolution has occurred.

II.    Today's Market. With the growth in recent years, panelists estimated the Asia-Pacific Fund Finance market to now be approximately $30-$50 billion, based on Lender commitments.  Virtually every global Sponsor's Asian Funds utilize a Facility.  Structures have "converged to the mean," a common description during the Conference of the market trend whereby Facility structures are increasingly the same across the United States, Europe and greater Asia.  This is driven by two primary factors:  First, for a global bank with a centralized Facility product offering, it is very challenging to maintain different structural policies based solely on geography.  Second, as Fund sizes have increased, Facilities often now need to be larger and require multiple Lenders to consummate.  This tends to lead to Facility structures the lead Lender is confident can be syndicated.  As a result, nearly all deals in Asia are now done on a secured basis, and a far greater percentage utilize an "Included Investor/Designated Investor"-style borrowing base.  Deals tend to be documented under British or United States law, with some truly local deals being consummated under Hong Kong and Australian law.  Hybrid Facilities and NAV-based lending are still in their early stages in Asia, with very few consummated transactions discussed at the Conference.  But Sponsors are inquiring.  The Asian market may be a little more relationship-based as compared to the price and structural sensitivities that are more prevalent in other markets.  Interestingly, there are new Lenders seeking to enter the market, often having to compete on structure and terms.  These new entrants can create a balancing act for Sponsors:  accepting the execution risk that comes with an unproven Lender with the structural and pricing accommodations that such Lenders may be willing to provide.

III.  Negative Press. While certainly not limited to the Asia-Pacific region, the recent press articles showcasing the Facility product in a somewhat misleading and inflammatory way were discussed at length at the Conference.  While the articles have certainly kept Lenders on the phone answering questions from their seniors and risk colleagues, no panelist reported any actual impact of the press coverage on their daily businesses.  There seemed to be a relatively widespread acceptance that sensationalized headlines drive clicks to web links, but as long as Sponsors engage in appropriate disclosure and transparency with Investors as to the intended use of both the Facility and any traditional leverage contemplated in the Fund's business plan, negative press coverage will not be an issue.

IV.   Market Challenges. Panelists identified several challenges that are more pronounced in the Asia-Pacific market, primarily turning on the greater number of currencies in which Investments need to be consummated.  Because Investor capital commitments are almost always in U.S. dollars, currency conversions and foreign exchange exposure is heightened.  Sponsors struggle to find hedging strategies that perfectly mitigate currency risk.  Additionally, even setting up banking relationships for all the applicable currencies can become an operational burden.  On the Lender side, underwriting standards have been increasingly challenged by Investors (particularly sovereigns) negotiating confidentiality provisions in their side letters that prohibit disclosure of their identity to Lenders.  While this certainly creates a credit challenge for Lenders, in certain cases it can cause 'know your customer' compliance problems as well.

Market Forecasts

I.     Forecasted Growth. The vast majority of attendees departed the Conference bullish on the near term growth potential of the Fund Finance markets in the Asia-Pacific.  Absent a systematic event, there are simply too many positive trends to think, the market will not continue to expand.  According to Preqin data, of the 3,100 plus Funds that are fundraising globally right now, 21% have an Asia focus.  That is a far higher percentage of private capital than Asia has historically raised.  95% of Investors have reported they intend to increase or maintain their allocation to the region in the next twelve months.  Panelists at the Conference estimate that today only about 50% of Asia-based Funds are utilizing Facilities, suggesting that growth via penetration remains.  Finally, local advisors report heightened levels of inquiry and interest, all forecasting continued market expansion.

II.    Chinese Bank Speculation. Panelists at the Conference contemplated whether a market disruptor might emerge in the near future.  One prediction:  the Chinese banks.  While the Chinese banks have certainly participated in the Facility markets from time to time, they have yet to enter the market at scale.  However, if you look at the Asian leveraged finance market as a potential model, the Chinese banks have meaningfully entered that market, competing effectively on both price and structure.  They now command a significant market share of the Asia-Pacific leveraged finance market.  Their comfort level with local sovereign Investors and historical touch points with Asia based Sponsors being what it is, will the Chinese banks take a more relationship-based approach to underwriting Funds and therefore disrupt the market?


The Asia-Pacific Fund Finance Market appears poised to maintain and continue its recent growth trajectory.  Despite a few real challenges at the margins, we see the region as a potential source of business growth for Lenders and advisors.  We also see opportunity for Sponsors in the region to more optimally manage their Funds' balance sheets with Facilities and appropriate leverage, improving overall performance and returns for their Investors.  We look forward to the 2018 Conference and the further development of the market.


1 The slides from Ms. Teo's presentation are available on the FFA's website at

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions