Randy Sim told reporters his firm sees no correlation between rising U.S. private credit defaults and Southeast Asian credit performance. IFS Capital, which deploys capital across Singapore, Indonesia, and Vietnam, runs a book that has shown zero basis point spread widening tied to American distress events over the past eighteen months.
The U.S. private credit market now carries $1.6 trillion in outstanding commitments, with default rates climbing to 4.2% in the lower-middle market as of Q4 2024. Sim's thesis: Southeast Asia's private credit universe operates on different collateral, different sponsor behavior, and different legal enforcement speed. His portfolio companies generate 68% of revenue from intra-ASEAN trade, not dollar-denominated export flows. When a Midwest manufacturing borrower defaults in Ohio, the ripple does not reach a Jakarta logistics company with peso-denominated receivables and a three-year locked facility.
The divergence matters because allocators have started treating "private credit" as a single asset class with correlated risk. Sim's data suggests otherwise. IFS Capital's Southeast Asian book returned 8.4% net in 2024 while U.S. peer funds reported 3.1% to 5.7%. The gap comes from structural differences: shorter deal cycles, higher attachment points, and borrower bases that do not rely on U.S. consumer demand. A Thai cold-chain operator does not care if a Dallas HVAC distributor misses a payment. The credit officers reviewing those loans do not share a data room or a bankruptcy court.
Allocators need to split their private credit exposure into at least two geographic risk buckets. A $500 million allocation to "global private credit" that blends U.S. and Southeast Asian exposure will not behave like a diversified position—it will behave like a U.S. position with a small overlay. The correlation breakdown Sim describes means rebalancing every six months, not annually. Family offices running concentrated books should track regional default rates separately and size positions accordingly. The next credit event in America will not predict the next one in Manila.
Watch for IFS Capital's Q1 2025 portfolio update in late April, which will include borrower-level geographic revenue breakdowns. If Sim's thesis holds, those numbers will show sub-2% default rates even as U.S. private credit funds report rising delinquencies. Southeast Asian central banks meet in March; any coordinated rate moves could tighten spreads further and widen the performance gap.
The firm manages $2.1 billion across forty-three portfolio companies. Sim has been making this argument since mid-2023. The data now supports him.