The Big Question

The big question clients are asking now is, “Why should I invest in Asian private credit?”

Hi, I'm Celia Yan, Head of APAC Private Credit at BlackRock.

We expect global private debt assets under management to reach US$3.5 trillion by the end of 2028, more than doubling from where we were in 2022¹. And I believe that much of the growth will come from Asia Pacific.

This region is extremely diverse, with some countries well-positioned for rapid economic expansion, and that means there will be an increasing need for capital to support business growth.

The opportunity here also brings with it strong diversification benefits, particularly for investors who may be more used to investing across the developed markets, in the US and Europe. And the power of that diversification grows along with the size of portfolios.

But Asia’s different markets also bring different risks. To capitalize on the region’s vast potential, investors need to know where and how to look for deals. And they must be able to structure them to deliver the desired risk-adjusted return outcome. It is then about monitoring and managing ongoing risks. And finally, knowing how and when to exit a deal to deliver the investment performance.

To do this, it is essential to have local teams, contacts, knowledge, and experience. There are no shortcuts here – having the right people on the ground in the right places is the only way.

Don’t miss out on the Asian private credit story.

¹Source: BlackRock, Preqin, as of 19 September 2024. 2024 to 2028 estimates are BlackRock estimates.
There is no guarantee that any forecasts made will come to pass. Diversification may not fully protect you from market risk.

The big question our clients in Asia-Pacific are asking is, how should I react to volatile markets?

Hi, I'm Alister Hibbert, Chief Investment Officer of the Strategic Equity team here at BlackRock. 

And this question is one of the most fundamental of all for public market investors. Public markets are fabulous because they allow us to change our mind and shift portfolios at short notice. But just because we can doesn't always mean we should. In fact, it is the behavioral mistakes made by investors themselves that often lead to short term decision making and poor returns. 

At the heart of all things, we need to remember that anything cyclical is always self-healing. After a bear market is a bull market. After a company misses its numbers because revenues come in lower than budget, the management team adapts the cost base and earnings to recover. But in all this volatility, investors often lose their way, turning temporary cyclical losses into permanent losses by selling at the wrong time. 

In short, there is a lot to be said for inaction in volatile markets. That means ignoring the deafening day-to-day noise of markets, remembering that it pays to be optimistic over time, and focusing only on the best companies. These are the companies which can sustain their high returns for the next ten years or more, and compound their earnings ahead of the market over the long term. 

So invest in the best (better) companies and stay invested. 

The big question clients are asking now is, “Is Asia Credit making a comeback?”

Hi, I'm Stephen Gough, portfolio manager and Head of Asia Credit at BlackRock.

The Asian Credit market investors knew three years ago is vastly different to what we see today.

It is now more diverse and no longer dominated by one country or sector. This shift opens up opportunities for alpha generation through deliberate bottom-up security selection.

With supportive economic growth, muted inflation, companies increasingly exhibiting quality tilts, and attractive valuations, the market has outperformed global peers over the past year.

It might surprise investors to hear that Asian Credit is a huge hotspot for alpha, and the way we generate alpha is by selecting the right securities. Being able to tell the difference between a good opportunity and a great opportunity is everything.

To do this, the key ingredient is research. That is why BlackRock has built one of the largest credit teams in Asia, with exceptional access to and deep relationships with our issuers.

We get under the hood to really understand a company, the capital solutions they require and through that deliver success for our clients. This is how we stay ahead of the curve, discerning valuable signals from the noise.

The time for Asian Credit is now.

The big question we have been hearing from clients is, ‘How can AI help us to invest?’ 

Hi, I’m Rui Zhao, a portfolio manager within BlackRock’s Systematic Active Equity team.

With so many stocks in the global market, it is extremely difficult for human investors to analyse all the information available from a multitude of sources on their own, and then extract useful insights of all the companies such as the company’s products, profitability, and growth prospects. That is where the benefit of AI comes in, and why we have been using it across our systematic investment platform.

We began using AI back in 2008 - building infrastructures that can accumulate all the big data, and train machines to analyse the data. We assess a universe of five thousand securities every day, constantly advancing our machine learning technique and evolving the signals that we use to generate alpha more effectively.

These signals can help us identify trending products among consumers, such as products recommended by online influencers, and assess investor sentiment from social media posts across different platforms and languages. We can also spot early red flags in company documents exchanged with regulators, which may indicate a potential negative impact on shareholder value.

So by using AI in our investment process, we can strive to better forecast returns and generate consistent income for our clients.

The biggest question clients are asking me today is how do I make my money work harder for me?

Hi, I'm Navin Saigal, Head of Asia Macro for Fundamental Fixed Income at BlackRock.

Well, cash in the system is at record highs. Money market funds, bank deposits, corporate balance sheets, you name it. And that's not surprising given that interest rates are also at multi-decade highs.

For most of the last two decades, when interest rates were much lower, you had to lend money for 10 to 30 years to companies that may not even be around to pay you back just to deliver any meaningful income.

But today, with yields significantly higher than before, you can lend money for shorter time horizons to much safer borrowers, say, to governments for 3 to 5 years and still get a meaningful income out of that.

Today, many building blocks that were not available in the past have become available again in portfolio construction. From Asian government bonds to European corporate bonds, these are all tools that could make up that global diversified portfolio, with a generous income stream.

With central banks on the verge of an easing cycle, this opportunity may not be there forever. So it's time to put your money to work now.

So the big question our clients in Asia are asking is the tremendous run that we have seen in the technology sector – if it's over, if it's hype, and will it continue?

Hi I'm Tony Kim. I'm the lead portfolio manager of the technology strategy for BlackRock.

My answer to this question is we're just getting going. And this is going to be the predominant theme for the rest of this decade. We are just in the early stages of the build out in the development, for AI and how that translates to the technology sector.

We look at AI from a full stack perspective, where we, decompose all the elements of AI, everything from energy to compute to software to models to data and to applications. We then look at all of those categories and subcategories, and we are investing along this whole stack.

We believe that this is going to continue throughout this decade. And so, in no means is it over. In fact, it's just beginning.

The big question that our clients in Asia Pacific are asking us today is how do I prepare my portfolio in a robust and resilient manner so that the portfolio is ready to maneuver and navigate today's fast changing markets?

Hi, I'm Daniel Caderas . I'm a multi-asset investor, and I lead the Global Tactical Asset Allocation team here at BlackRock.

What worked in the past potentially, where you just combine stocks and bonds in a portfolio and they're largely offset by each other, in particular, during periods of stress and volatility. Those times are gone.

We believe as an investor these days you want to be flexible, you want to be nimble. You also want to incorporate the fact that the world is changing fast, and you want to have a more short-term view.

We are a team which invests in a more tactical manner, which means we focus on the short-term to mid-term time horizon. We do this across a large opportunity set, and that allows us to be flexible in terms of going anywhere. So wherever we believe there's dislocations, discrepancies, wherever the market tends to overreact or underreact, that's where we can position ourselves.