Fresh from launching its private credit business for Asia, Allianz is looking to focus on the Indian market, said Allianz Investment Management CEO and Asia chief investment officer Ritu Arora.
Besides India, other markets including Indonesia and Thailand “could become more interesting”, said Arora, noting that these markets have their own set of challenges as well.
“The growth of the Indian economy, which is likely to continue because of fundamental trends like positive demographics, triggers significant financing needs for the real economy. A challenge for private credit in India has been the regulatory environment and the difficulties of ensuring creditor rights in a timely matter.
“With the new insolvency and bankruptcy (IBC) code, this is now moving in the right direction. The framework is solid and now needs to be tested in practice. The first data points from ongoing cases look promising to us, but it is still too early to tell and the real test will come when many mid-sized companies hit the proceedings,” she told DEALSTREETASIA in an email interaction.
Last November, the German insurer’s investment arm roped in former executives at private equity firm Abraaj Group, Sumit Bandhari and Weizhong Yun, for its Singapore-based pan-Asian private credit team.
While some investors are concerned about the increasing global dry powder in private equity, Arora said there is nothing to be alarmed about, as deal volume continues to increase globally – a reflection of the continuing interest by investors in the asset class, in particular relative to other investment opportunities.
“This is no different in Asia, where the current dry powder probably represents 2.5 to 3.5 years of deal volume. The private equity market opportunity set continues to grow in Asia as a result of the continued maturity of the respective PE markets particularly in large emerging markets such as China, India and Southeast Asia.
“Succession issues, challenges of growth or international competition and expansion, as well as the wider acceptance of private equity are contributors,” she said.
Although Southeast Asian private equity market is expected to be smaller than both China and India as it is less mature and more fragmented, Arora said, venture capital in Indonesia could develop faster than the overall private equity market, given its large, young, tech-savvy population.
Allianz Group, via its digital investment unit Allianz X, has invested $35 million into Indonesian ride-hailing major Go-Jek’s $1.5-billion funding round raised last year. The unicorn startup is said to be finalising a $2-billion funding round to boost its international expansion plans, Arora declined to comment.
On real estate, Arora said Allianz’s growing insurance business in Southeast Asian key markets including Thailand and Indonesia is opening up opportunities for its property arm to property investments in these same markets.
“Asia’s property markets kicked off 2019 with growing headwinds, with concerns over a global trade war, rising interest rates and increasing valuations. Our investments are aligned to underlying economic trends. Despite the headwinds, on a relative basis, we find Asia as an ideal destination for securing diversification as well as secular growth trends.
“Our focus in 2019 will continue to be on office and logistics sectors especially in fast growing markets like China, India and SEA. Real estate investments in retail, and developing markets like Australia and Japan will be selective and focused on generating stabilised yield,” she said.
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