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Winning in Asia's massive credit market requires more than one strategy, says investor

  • If yield-seekers want to profit from Asia's credit market, they must be prepared to vary their investing strategies across the region, said Ilfryn Carstairs of Varde Partners
  • The retreat of traditional lenders has created opportunities for lending and for owning the lending infrastructure, Carstairs added

Asia's credit market has grown massively, but if yield-seekers want a slice of that pie, they must be prepared to vary their investing strategies across the region, according to Singapore-based Ilfryn Carstairs, co-chief investment officer at Varde Partners, an alternative investment advisory.

"It's difficult to talk about Asia as a single market," Carstairs said.

"I think you have to break down to the different pieces and be able to say, well, here in India there's a systemic [non-performing loans] problem. Will that start to transact?" he added.

Other Asian markets offer opportunities to extend credit at interesting rates, and still others, like the ones involved in commodities and infrastructure, present cyclical opportunities, according to Carstairs.

India is facing a persistent problem with non-performing assets, or "bad" loans. Some financiers, however, have expressed the view that India's credit issue is overblown and is not a cause for concern.

Bank employees rally at a nationwide strike on August 22, 2017 in Kolkata, India.
Saikat Paul | LightRocket | Getty Images
Bank employees rally at a nationwide strike on August 22, 2017 in Kolkata, India.

The rise of alternative lending in Asia also presents good opportunities for investors to get into the credit space, according to Carstairs.

As part of an interesting "global theme," traditional lenders are pulling back in their primary markets, Carstairs said. In Western Europe and the United States, a significant retreat has "created about a half a trillion dollar opportunity, or a gap where that lending used to be," he added.

The situation therefore generates "not just the opportunity to lend, but also ... to own the lending infrastructure," Carstairs said.

Non-bank lenders in the U.S. like Quicken, loanDepot and Caliber Home Loans have largely displaced big banks in the mortgage market over the past several years. However, the banking sector is expecting some deregulation under the current administration, so traditional lenders could re-enter the market and pose a threat to non-bank credit providers.