Hillhouse pitches $1B Asia private credit fund to investors

The private credit market in the region is small but growing.

Hillhouse, the investment firm started with backing from Yale University’s endowment, is preparing to pitch a new Asia-focused private credit fund to international investors as the asset class continues to grow in the region.

Hillhouse, which has traditionally focused on public and private equity, has set up a private credit business called Elham Credit Partners, said people familiar with the matter, asking not to be identified discussing private information. While talks with potential investors are ongoing and no final target has been set, one person familiar with the matter said the fund may reach between $900 million and $1.1 billion.

Private credit in Asia, even though a small percentage of the $1.5 trillion global market, has been growing steadily, with $95 billion in assets as of September 2022, up 28% from the beginning of the year, according to Preqin Ltd. Dry powder, the amount of capital fund managers have available to deploy, was still plentiful, the London-based data provider found.

Hillhouse hopes to capture a share of the growing market and has hired senior executives to build out its credit team. These include ex-Deutsche Bank AG’s Siddhartha Hari, along with Sandeep Chandak from Varde Partners and Srinivasulu Yanamandra, who was most recently a managing director at Barclays Plc.

The new fund will focus on so-called performing credit investments in well-established companies posting profit before interest, taxes, depreciation and amortization. The average size of its investments will be between $50 million and $75 million, said the people. The fund aims for yields between 11% and 15% for the investments, they added.

A spokesperson for the firm declined to comment on the fundraising plans. Hillhouse manages more than $100 billion in public and private market investments.

Hillhouse is also gauging international investor interest for what could be a multi-billion dollar fund to buy beaten-down Chinese stocks, Bloomberg News reported in September.