BlackRock Says India Tops List as It Expands Private Credit

(Bloomberg) -- BlackRock Inc., the world's largest money manager, said that India is the biggest opportunity for the firm within Asia as it expands lending where banks fear to tread.

The asset manager is pushing into private credit in the region as unprecedented monetary easing by central banks has weighed on bond market rates. Almost $10 trillion of securities from around the world still offered negative rates at the end of last month and that's spurring investors to seek out alternatives. Lenders are also retreating from extending money to smaller companies, leaving gaps that asset managers in search of yield are looking to fill.

Private credit provides an “attractive return paradigm” for investors in the current low-rate environment, said Neeraj Seth, Singapore-based head of Asian credit at the firm. “India is at a very, very interesting juncture when you think about the opportunistic credit investments.”

Gross domestic product in India rose 7.1 percent in the second quarter from a year earlier, the fastest among Asia's major economies. The improving outlook for the world's second most populous nation and progress in overhauling the nation's bankruptcy procedures is also reviving investor confidence.

India Constrained

BlackRock sees “significant opportunities” across the spectrum, ranging from growth capital to stressed refinancing and distressed opportunities. India's banking system is the “most constrained” in Asia due to bad loans, according to Seth.

While the asset manager sees scope for lending in China, the east Asian nation is a “little lower on the list” due to ample onshore liquidity, according to Seth. “When onshore liquidity is high, the premium shrinks,” he said.

Neeraj said that the firm is not actively involved in nonperforming loans in India and China. “The risk-return pricing has to be right and we don't see that at the moment,” he added.

BlackRock has expanded its private credit team for Asia, having hired former hedge fund manager Justin Ferrier as a managing director earlier this year. It expects the pullback among lenders to continue, creating gaps for alternative financiers. “We are looking at the footsteps of banks and seeing what gaps they leave behind,” said Seth.

To contact the reporter on this story: Denise Wee in Hong Kong at dwee10@bloomberg.net. To contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, Benjamin Purvis, Sandy Hendry