Winners rationale

Demand for private debt among Asia’s private wealth community continued to rise in 2019 as investors grappled with a persistent low-rate environment, concerns over equity market volatility, and relative valuations, while high transaction activity and a stable demand for financing kept drumming up tailwinds for the asset class.

Hong Kong-based Cachet Asset Management relaunched its Cachet Deep Value fund in April 2019 as a structured credit fund and invested in asset-backed high yield instruments with a shorter duration than regular bond instruments. The firm itself was established in 2014, initially as a multi-family office for Chinese UHNW families. It has since expanded its offering to include DPM, legacy planning, and five funds catering to HNWIs, which includes its private credit strategy.

The Cachet Deep Value fund adopts both a return-maximising strategy and a capital preservation strategy. The former seeks to generate a target return of 15% through purchasing either performing or distressed credit instruments, while the latter invests in mezzanine debt and senior debt funds, with target returns of 13-17% for the former, and 6-10% (unlevered) and 11-15% (levered) for the latter.

Management of the Cachet Deep Value fund rests on three key principles: risk management, where loan issuers are mostly listed companies with a personal guarantee on the loan and extra collateral from the controlling shareholder to minimise default risk; yield enhancement on the basis that private debt, as one of the fastest growing asset classes (due to its risk adjusted return expectations) is widely expected to deliver among the highest returns over the next three years; and duration risk control, whereby debt duration ranges from six to 12 months and interest payment occurs on a monthly or tri-monthly basis to ensure liquidity and cashflow.

For the period under consideration, the fund, which is overseen by a team with multiple decades of experience in direct lending, structured financing, and asset-backed lending, delivered 6.58% gross of fees against the Barclays Capital Global Hedged USD index’s performance of 5.1%, with net inflows from private banks in the region reaching USD million double digits over the same period.

The firm places considerable emphasis on service and transparency. Cachet Asset Management refers to itself as a “long-standing partner” of its clients, providing direct and unfettered access to Cachet Asset Management’s relationship managers and fund operations officers as well as monthly NAV reports and factsheets, and a regular investor newsletter.

Cachet Asset Management is Asian Private Banker’s Best Fund Provider – Private Debt.