Institutional investors are becoming more cautious about loose underwriting standards and concentration risks emerging in some parts of the global private credit market.
Senior executives from several institutions voiced their concerns during a panel discussion at Asia Asset Management’s 14th Annual Malaysia Roundtable last week.
The group included Ahmad Farouk Mohamed, chief investment officer of Lembaga Tabung Angkatan Tentera (LTAT), Malaysia’s Armed Forces Fund Board, who said years of easy liquidity have created “structural imperfections” in private credit markets.
“There has been consistent structural loose underwriting. I think we are seeing some over exposure, over concentration in certain sectors as well,” he said at the panel session during the roundtable in Kuala Lumpur on May 5.
He said LTAT is preparing to enter the private credit market for the first time but will prioritise safety over chasing outsized returns.
“We are going to be looking for safe investments, safe security investments, something that can give us in the region of high, high single digits,” he said.
Stresses in private markets will expose weaker asset managers, according to fellow panellist Mohd Khamil Ibrahim, group head of private markets at Permodalan Nasional, Malaysia’s largest fund management company.
“This is when you would actually see the differentiation between a real good manager against those who just trying to come to market and try to capture the opportunity,” he said.
Another panellist, Emmanuel Deblanc, CIO of the UK’s M&G Investments, touched on the artificial intelligence boom. He said software and AI-linked sectors are undergoing a valuation reset after years of abundant liquidity and investor optimism.
“We were at sky high valuations. This is leading to an adjustment to the enterprise values of those software companies, whether you’re public or private markets,” he said.
He voiced concern about the massive investments going into AI infrastructure.
“In 2026, the expectation is for US$750 billion of investment just in data centres. These are unheard of amounts and the speed of investment in that sector,” he said.
The fourth panellist, Anthony Siau, founder and chairman of Kairos Capital Group, a private equity and venture capital firm from Singapore, warned against blindly chasing AI investments.
He said a lot of companies are simply saying ‘I’m using AI’, but are not really doing so.
