CapitaLand Investment tells shareholders it will stick to property-backed lending as concerns emerge

SINGAPORE - Amid growing anxiety over rising redemptions in the private credit market, CapitaLand Investment (CLI) said it is not backing down from its strategy of extending real estate-backed loans in the Asia-Pacific region.

Private credit refers to loans made by non-bank lenders directly to borrowers, typically outside public markets.

The asset manager was responding to a question submitted by a shareholder ahead of its April 28 annual general meeting. It is expected to announce its financial results for the first quarter of 2026 the following day.

It was asked about its exposure to private credit strategies, how its management assesses and manages risks in this segment, and whether it had experienced any impact from recent developments in the private credit market.

CLI replied that its credit strategy is differentiated, with a focus on real estate credit in Asia-Pacific that is supported by disciplined underwriting and appropriate structural safeguards across its portfolio. “This approach provides tangible asset backing and is structurally different from highly leveraged or unsecured credit strategies in other markets,” it said.

The real estate manager did not elaborate on how it would mitigate risks in the private credit market.

Unlike bank loans, which are backed by customer deposits, private credit firms’ loans are backed by money raised from private investors and use floating interest rates. Real estate-backed loans, a form of private credit, are typically secured by real estate assets or cash flows.

As at March, CLI has $125 billion in funds under management across 45 countries, with real estate credit representing just 2.4 per cent at $3 billion, located mostly in Singapore, Australia and South Korea.

Among its funds is Wingate Group, one of Australia’s largest private credit managers covering property and corporate credit, which it acquired in June 2025 for A$200 million (S$182 million). At that time, Wingate had already executed more than 350 transactions worth over A$20 billion in real estate value.

CLI announced on April 13 it had also raised US$320 million (S$408 million) for its Asia-Pacific real estate credit fund CapitaLand Asia Pacific Credit Program II. The fund has already been allocated to five first mortgage loans across logistics, office and living assets in Sydney and the Seoul Metropolitan Area.

CLI added that it continues to see “selective opportunities” in real estate-backed credit in Asia-Pacific as traditional bank lending remains constrained in certain markets, lifting demand for alternative financing.

Private credit under pressure

The global private credit market, worth about US$3 trillion, is facing growing pressure as defaults rise and investors rush to withdraw funds amid concerns over the risks of these loans.

A potential trigger came in September 2025, when major US auto lender Tricolor Holdings and auto parts firm First Brands Group collapsed, with the latter owing more than US$11 billion. Since then, concerns have grown over whether lending standards in the private credit industry have been too lax.

At the same time, disruption in the tech sector from advances in AI has added to the strain. Many software companies, which make up a significant share of private credit portfolios, had taken on heavy debt and are now seeing valuations fall, raising the risk of defaults.

Morgan Stanley said it expects annual private credit defaults of 8 per cent between the second half of 2026 and the first half of 2027, fuelled by increased pressure on software companies.

Fitch Ratings said the private credit default rate in the US rose to 5.8 per cent for the 12 months to January 2026, up from 5.6 per cent in December 2025.

The agency added that it recorded 11 default events in February, nearly double the 2025 monthly average of 5.9, pointing to a pick-up in stress across the market.

On April 2, New York-headquartered private credit investment firm Blue Owl Capital imposed a cap on withdrawals after investors tried to pull US$5.4 billion from two key funds.

The investment firm, while denying any problems in its loans, said the withdrawals reflected “a period of heightened negative sentiment towards the asset class”, which had “intensified” resulting from rivals having published details of their own redemption requests.

IFS Capital receives questions from SIAS

Meanwhile, IFS Capital has said the private credit-related concerns in the US and Europe are unlikely to have a huge impact on its Singapore business, as the unease in the US and Europe is concentrated largely in loans to private equity-backed buyouts and highly indebted mid-sized companies.

Mainboard-listed IFS Capital was responding to a question on potential challenges in the Asian private credit market by the Securities Investors Association (Singapore) on April 23, in relation to its annual report filed for the financial year ended Dec 31, 2025.

The financial services firm said its private credit business is focused mainly on direct lending to small and medium-sized enterprises (SMEs) across Singapore and other South-east Asian countries through asset-based financing. These include trade receivables, production and information technology equipment, and real estate.

Hence, the risks are more manageable as they can be monitored closely through its borrower relationships.

However, it noted some weakening in the financial health of certain SME segments, where margins are being squeezed by inflation, volatile supply costs and broader economic uncertainty.

It added that a large funding gap for SMEs in the ASEAN region remains, which will continue to support long-term growth.