A credit-able showing ahead

AFTER a period of caution that saw deal making slow across the region, private equity professionals are now striking a bullish tone for 2026.

Last year proved challenging for private equity due to geopolitical tensions and economic volatility. Deal momentum, however, rebounded in the later part of the year as uncertainties eased and this is likely to continue into 2026.

The year 2025, too, had started off promisingly, says Ekuiti Nasional Bhd (Ekuinas) chief executive officer Aliff Omar Mohamad Omar.

“We closed our first deal early in the year with an investment in domestic cybersecurity firm, Bluesify Solutions Sdn Bhd.

“But then came Liberation Day, followed by a very brutal trade war.

“Companies we invested in have had to revisit their supply chains to look at ways in which to remain resilient.

“Additionally, conversations we were having with promoters (for possible investments) had to be halted as many adopted a wait-and-see approach. But as trade talks began to normalise, talks on deals have also resumed,” he says.

Aliff was one of the speakers at a recently held roundtable discussion entitled “Private Equity & Private Credit Trends Shaping 2026 and Beyond”, by Ekuinas in collaboration with StarBiz 7.

He says Malaysia remains a “very interesting place to play” within the South-East Asia region and is the market where investors “can still make money multiples of between 2.5 to 3.5 times in an environment where risk can be priced reasonably”.

“This is due to the country’s institutional framework, strong workforce and relative maturity of its economy.

“It is easy to say that if you invest abroad, you make better returns than in Malaysia.

“However, there are international private equity firms that invest in Malaysia and make a lot of returns. There are many hidden gems in the middle market here,” he says.

Ekuinas’ focus is on the healthcare, consumer and technology sectors.

Meanwhile, Kumpulan Wang Persaraan (Diperbadankan) (KWAP) chief investment officer Hazman Hilmi Sallahuddin says the fund has traditionally been sector agnostic, but is now focusing on healthcare, education, food security, civil economy, digital economy, financial inclusion, energy transition, advanced manufacturing and consumer sectors.

Apart from the RM500mil Dana Perintis and the RM6bil Dana Pemacu fund programmes, KWAP also launched the RM2bil Dana Iklim + last year.

“Under Dana Perintis, we have invested in seven venture capital funds and two direct investments.

“Hopefully by this year we can launch the second cohort, Dana Perintis 2.

“For Dana Pemacu, we are aiming to deploy at least 50% by the end of 2026 or the first quarter of 2027. Further, climate investing is relatively more nascent than private markets in Malaysia.

“So far, we have three deals in the pipeline under Dana Iklim+, which we hope to close by June 2026,” he says.

Bain & Company Singapore partner Ben Balzer says for Malaysia, healthcare, higher-end manufacturing technology and digital infrastructure are evergreen sectors.

“The healthcare sector continues to attract good deal flow driven by ageing societies, a higher prevalence of diseases and under-penetration. There are also pockets of higher-end manufacturing technology, such as semiconductor value chains and data centre-related areas,” he says.

Exit activity for private equity firms, however, remain subdued.

The ratio that measures the cash that investors in private equity firms get back, has been under pressure not just here but globally too.

Hazman says exit outcomes are increasingly shaped by sector preferences and market dynamics, with healthcare firms, for instance, finding stronger valuations in Malaysia.

Private credit

Private credit is emerging as a complementary tool alongside private equity, as mid-sized companies seek more flexible financing options amid shifting bank lending appetite.

Private credit is still in its infancy in Malaysia and the Asian region, unlike in North America.

The rapid growth of private credit, however, has drawn caution with some commentators raising the prospect of defaults due to the higher risks.

For Ekuinas, private credit is seen as a “potent instrument” to help middle-market companies where traditional bank financing is often constrained.

“Our approach to private credit is to bridge the gap between bank loans and equity,” Aliff says.

Ekuinas launched its RM800mil syariah-compliant private credit fund in November 2024, and completed its first transaction in early 2025.

“We hope to have at least two to three more deals soon,” Aliff says.

Apart from direct lending, Ekuinas also uses other structures like asset-backed, mezzanine or junior financing.

“Banks usually lend against assets. We try to be a little more creative, looking at cash flow or even private shares as a form of collateral; how we price the risk is where we believe we will add value,” Aliff says, adding that Ekuinas’ ability to deploy credit fast “in a way that traditional banks cannot” is another of its strengths.

For this reason, Hazman says private credit is “very sexy”. It gives investors debt-like protection with equity-like returns.

“There is collateral behind it. On a risk-adjusted basis, it is more attractive than private equity due to this downside protection, while still offering double-digit returns,” he says.

KWAP has only recently begun investing in private credit, with its current focus on developed markets. It is expected to expand into Malaysia and South-East Asia by the second half of 2026, Hazman says.

“We will focus on the senior secured segment rather than higher risk categories.

“With private credit, investors can get returns as high as 18% to 20% if they take higher risks. However, I think KWAP will play at around the 10% to 12% range,” he says.

Going into 2026, geopolitical risks will continue to shape investment decisions .

That said, Balzer feels that South-East Asia is “punching below its weight” relative to the size of its economy and the population.

“Momentum has been building, particularly from the second half of 2025. The velocity of capital is what this region really needs.

“As more investments come in, and more entrepreneurs grow more comfortable with different funding sources – like private equity and private credit – alongside more exits, a positive flywheel can begin to take hold, drawing in more investors, entrepreneurs and promoters across the region,” he says