Asia’s Fund Finance Market: From Fragmentation to Opportunity

The Asia-Pacific fund finance market is diverse and rapidly evolving. While global adoption of fund finance has surged – rising from 10% in 2000 to 90% in 2023 – Asia still represents just over 10% of the global market. This gap signals immense untapped potential.

Key Insight:

Japan, in particular, is emerging as a standout performer, with participants from the recent 2nd Annual Tokyo Fund Finance Association Conference marked the increase investor appetite for the Japanese market. Amid global volatility and de-dollarisation trends, international capital is increasingly viewing Japan as a stable, governance-driven, and investor-friendly destination. This is driving a surge in private capital deployment – and with it, demand for fund finance.

Legal and Structural Innovation: Catalysts for Growth

Historically, Japan’s fund finance market has been constrained by structural and legal limitations – such as fund documents prohibiting borrowing and collateral, and limited GP familiarity with fund finance tools. However, this is changing.

What’s New:

The Japanese Ministry of Economy, Trade and Industry (METI) has introduced a Model LPA that explicitly permits fund-level borrowing and collateralization.

This could be a game-changer, aligning Japanese fund structures with global standards and unlocking broader adoption of subscription lines and NAV-based facilities.

Client-Centric Insights: What Fund Managers Need to Know

Fund finance is no longer just about liquidity – it’s about strategy. Today’s fund managers are leveraging:

NAV-based lending to unlock value from portfolio assets,

to unlock value from portfolio assets, Hybrid structures to manage redemptions and capital calls,

to manage redemptions and capital calls, Tailored debt solutions to support distressed or high-growth companies.

These tools are especially critical in today’s environment of subdued valuations, challenging fundraising conditions, and volatile capital markets.

Mid-market managers in Asia face both the greatest opportunity and the steepest challenges – particularly in accessing structured finance amid market fragmentation and limited internal resources.

Regional Dynamics: A Closer Look