Principal Southeast Asia is preparing to launch a US$250 million fund aimed at tapping into direct lending opportunities across the ASEAN region, according to a report from DealStreetAsia.
The company is a joint venture between the U.S.-listed Principal Financial Group (PFG) and CIMB Group Holdings.
This fund is expected to materialise within the next year as part of the firm’s broader focus on expanding its presence in private credit markets.
Munirah Khairuddin, CEO of Malaysia & Global Shariah at Principal, explained that the company is shifting its business model towards managing direct lending operations, rather than acting as a limited partner (LP) in external funds.
Khairuddin noted that Principal’s strategy involves building in-house teams and collaborating with general partners (GPs) that have a deep understanding of local markets, particularly in sourcing and underwriting deals.
The firm is primarily targeting mid-sized companies, with earnings before interest, taxes, depreciation, and amortisation (EBITDA) of around US$25 million in the U.S.
However, Khairuddin acknowledged that this threshold may be adjusted for Southeast Asian markets, where smaller companies with EBITDA ranging between US$5-10 million are more common.
Principal is still fine-tuning its criteria for identifying the right segment to enter.
The firm sees significant potential in industries that have been overlooked by traditional banking institutions, particularly in Malaysia, Singapore, Thailand, and Vietnam.
Sectors such as lifestyle and entertainment, where companies often face challenges in securing financing through conventional means, are key targets for the Principal’s lending strategy.
With interest rates in some parts of the region reaching as high as 18%, Principal aims to provide more competitive lending alternatives.
Despite strong competition from regional banks, Khairuddin believes there are still untapped opportunities in Asia’s private credit market, especially if returns can reach double-digit figures.
In certain markets like Thailand and Vietnam, yields of 12-18% are achievable, making the region’s credit landscape attractive for investors.
Featured image credit: Edited from Freepik
