Private credit has emerged as much-debated asset class in recent times, especially in the US where it is estimated to be a $1.5 trillion market. Well-known Wall Street veteran, Jeffrey Gundlach, CEO of DoubleLine Capital LP, believes if 2008 crisis was triggered by mortgage loans, this time around private credit could be a trigger for a meltdown as he believes lenders are making “garbage loans”.

The collapse of auto lender Tricolor and car parts supplier First Brands Group are seen as cautionary tales of the euphoria around this favoured asset class among sophisticated and high net worth clients.

Also read: Motilal Oswal Private Wealth backs flexi-cap equity, credit as core allocations for 2026

While tales of caution abound the US, the story in Asia is one of rising opportunity. With banks still dominating the credit supply and the region accounting for the lion's share of global GDP growth, non-bank lenders are finding fertile ground for flexible and customized financing solutions.

Diane Raposio, partner and head of Asia credit & markets at KKR, underscores the nature of the opportunity: “Private credit in Asia is still relatively nascent compared to the U.S. and Europe, and that’s precisely what makes the opportunity compelling. Asia represents the majority of global GDP growth, yet accounts for only a small share of global private credit capital.”

KKR & Co, the New York-based investment giant, which is doubling down on its Asia private credit strategy through vehicles such as its Asia Credit Opportunities Fund II (ACOF II). Drawing on over two decades of experience in the region, KKR sees Asia's underpenetrated markets as a goldmine for proprietary deals even as it has wrapped $2.5 billion in its latest Asia Pacific fund.

The Asia-Pacific private credit market is projected to grow by 46% from $59 billion in 2024 to $92 billion by 2027, according to a report from the Alternative Investment Management Association, co-authored with Simmons & Simmons, EY, and Broadridge.

KKR’s moats in a nascent market

KKR's global credit arm manages approximately $282 billion in assets under management (AUM), split across leveraged credit ($143 billion), private credit ($131 billion), and strategic investments ($8 billion). In Asia, the firm has been building its presence for 20 years, leveraging local teams to forge deep relationships and source deals that newer entrants struggle to match.

Raposio highlights the distinction that sets KKR apart: "In Asia, the moat is not just cost of capital; it is origination, diligence and the ability to structure with real control. We typically look to be the sole or lead investor, with ‘ball control’ on terms and structure.” KKR has been active in private credit for over 20 years, investing across cycles, and incorporating lessons learned from past investments into its investment process. This experience is complemented by deep local roots: "KKR has been on the ground in Asia building deep local relationships for 20 years. Asia isn’t one market, and having experienced teams on the ground in each country is critical,” says Raposio.

Also read: India now APAC's no. 2 in real estate private credit; poised to capture 25% of regional growth by 2028: Knight Frank

Local presence builds trust, which matters enormously when corporates are choosing a long-term capital partner. “It also gives us unique insight in diligence, leveraging our long-term relationships we can develop a deep understanding of how businesses really operate, how governance works in practice, and how capital structures should be designed in each market," adds Raposio.

The firm's latest fundraising efforts reflect growing investor appetite. In the recent close for its Asia private credit business, 75% of capital came from limited partners (LPs) new to KKR's Asia credit strategy, including insurance companies, public pension funds, and sovereign wealth funds.

Raposio notes the shifting investor mindset: "For many of these investors, private credit is not a replacement for listed equities, but a way to build more resilient portfolios with predictable income across cycles." This receptivity from institutional heavyweights—insurers, endowments, and pension funds—signals private credit's maturation as a diversification tool, even as it remains underrepresented in Asia relative to developed markets.

India: The Standout Market

While KKR's pan-Asia approach allows flexibility across geographies, India emerges as a standout market. SJ Lim, managing director and head of Asia private credit at KKR, points to the country's strong macro backdrop: "Today, India stands out with a relatively strong macro backdrop, while in Greater China we remain more selective, though structural factors like lower private credit penetration can create compelling opportunities. Australia has been a core market for this strategy and is expected to remain a meaningful part of ACOF II, while Japan, Korea, and Singapore are areas where we’re increasingly constructive as opportunities emerge."

According to PwC, India has emerged as one of the largest private debt markets in the APAC region, as much as 30% of private credit fundraising by the end of 2025. Historically, offshore foreign portfolio investors have been the biggest contributors to private credit invested in India.

While domestic banks are a dominant lending force followed by NBFCs, alternative financing options such as private credit is slowly coming of age. Currently, private credit assets in India is estimated to be in the range of $25 billion.

In India, private credit is positioning itself not as a rival to traditional banks but as a vital complement. Raposio elaborates: "We see the two as complementary, with increasingly compelling opportunities for private credit. Bank financing still dominates across Asia, and private credit is a natural complement where borrowers need flexibility, speed, or bespoke structures that banks often don’t provide. In India specifically, we’re seeing increased private equity and corporate activity driving demand for sponsor-backed direct lending and flexible financing solutions, especially for growth, acquisitions, and balance sheet optimization that aren’t always well served by traditional banks."

According to a recent S&P Global report, India's private credit market is "coming of age," with assets under management estimated at 0.6% of India’s GDP and 1.2% of the overall corporate lending sector. The report highlights that private credit has filled structural voids, particularly in real estate and M&A, driven by regulatory restrictions on banks and a strengthened insolvency framework under the Insolvency and Bankruptcy Code 2016, which has reduced resolution times to under two years and improved recovery rates to 33%. Debt issuance in 2024 was around $8 billion to $10 billion, with expectations of a significant jump in 2025 due to large deals like the $3.4 billion Shapoorji Pallonji Group transaction.

Focus on structural growth themes

KKR's sectoral focus in India aligns with the nation's long-term structural growth themes. The firm collaborates with its private equity and infrastructure teams to target areas like critical infrastructure, energy transition, essential services, technology-enabled businesses, and domestic consumption platforms.

"We see opportunities in a range of sectors across India’s economy, and we work alongside our private equity and infrastructure teams to invest behind long-term structural themes that support sustainable growth and national priorities," says Raposio.

Focus is on critical infrastructure, including roads, highways and power networks that strengthen connectivity and economic productivity. “We also invest in the energy transition, backing renewable energy and decarbonization platforms that help meet India’s rising power needs while supporting its net-zero ambitions,” adds Raposio.

Beyond infrastructure, KKR is also looking at essential services such as healthcare and education, where demand is driven by demographics, rising incomes and the need for higher-quality delivery at scale. The other opportunities include technology-enabled businesses that improve productivity, digitise operations, and position India as a global technology and services hub.

The S&P Global analysis echoes this, noting that 25% of 2024 private credit deals were for growth capital, 35% for acquisitions, and 39% for refinancing, with heavy emphasis on infrastructure, energy, and renewables. Real estate dominates, accounting for over a third of transaction value, while M&A-related deals make up about 35%.

But the big driver of India’s GDP growth is something that is also investors’ favourite, and it’s no different for KKR. “We back domestic consumption and consumer platforms that benefit from formalization, brand development and the expansion of India’s middle class," explains Raposio.

Risk and return expectations

Risk management remains central to KKR's approach, especially in a nascent market prone to volatility. Lim outlines the firm's underwriting philosophy: "We are focused on the basics of cash flows, capital preservation, sector thematics and backing companies and entrepreneurs that have a real right to win. In the context of Asia, given a more nascent market with a variety of jurisdictions we also place significant emphasis on counterparty selection, structure and achieving the right alignment with our borrowers as capital partners."

Lessons from past stress periods have fortified ACOF II's framework: "Because this is a performing private credit strategy, the lessons from stress periods show up in discipline: conservative leverage, robust lender protections, and careful borrower selection," says Lim.

The strategy targets net returns in low teens, driven by a diversified portfolio across geographies, asset types, and the three investing themes. Senior risk benefits from conservative leverage and strong protections, while junior debt involves greater complexity but comes with enhanced controls. Asset-backed opportunities vary by seniority and asset quality, often with premiums in underpenetrated markets.

On illiquidity risks, KKR prioritises control and selectivity. With ACOF II, the focus is on performing credit, conservative underwriting and structures that emphasize capital preservation, cash-flow visibility and strong lender protections. “We typically seek to be the sole or lead investor so we retain control over terms and can engage constructively with borrowers if conditions change. The objective is not to chase yield, but to protect principal and deliver consistent returns through cycles," says Lim.

Navigating skepticism

Amid the optimism, skeptics have raised alarms about the private credit boom, drawing parallels to past financial crises. "The private credit thing is starting to be less of a theoretical shakeout... And now we're starting to see sort of the canaries in the coal mine kind of falling to the bottom of the cage," Gundlach had commented.

Bridgewater founder Ray Dalio has similarly cautioned about mounting stress in venture capital and private credit due to higher rates squeezing leveraged assets, as part of broader private market strain.

KKR though views the recent issues as idiosyncratic rather than systemic. Private credit today typically involves high-quality loans underwritten by sophisticated investors. The bigger risk in private credit comes when managers drift from fundamentals, with poor underwriting, relaxed due diligence, overly concentrated positions or overreaching for risk. KKR believes that performing credit and lending to fundamentally healthy businesses are specifically the approach they adopt to avoid such outcomes.

Unlike the US, where experts like Gundlach believe private credit could descend into a mess amid its massive scale, Asia's market remains comparatively small and nascent. S&P Global’s report emphasises that "the limited interconnectedness between private credit and the broader financial sector will likely mitigate systemic risks, but spillover effects could compound in a credit downcycle."

The report notes that private credit in India has grown during robust economic times and remains untested in a significant downturn, with risks from covenant-lite deals and collateral enforceability, but regulatory safeguards such as RBI restrictions on bank-AIF investments help contain spillovers. Competition from resurging equity markets and debt mutual funds could also challenge momentum, yet S&P sees the industry "poised for growth" driven by financing gaps and a stronger insolvency framework.

As Asia's private credit market matures, commoditisation (read competition from local AIFs) looms as a potential risk. But if KKR can keep ‘ball control’ then it could well play a critical role in India’s private credit growth story.