Temasek is stepping up its push into private credit as the Singapore state investment firm seeks more stable sources of returns and greater portfolio diversification amid a more uncertain global investment environment.
Private credit exposure has grown more than six-fold over the past decade and currently accounts for about 2% of Temasek’s S$518 billion ($401.1 billion) portfolio as of the financial year ended March 31, 2026. The firm is targeting to increase the allocation to around 5% by 2031.
“We find fairly attractive risk-adjusted returns in the private credit market today, and we continue to build a very diversified portfolio, investing across corporate credit, asset-backed lending, as well as real estate credit,” said Alpin Mehta, head of PE capital solutions for Temasek’s partnership solutions.
Temasek in 2024 consolidated its private credit investments under Aranda Principal Strategies, which was seeded with an initial S$10 billion portfolio. The platform has since grown to over S$13 billion and is generating more than S$1 billion in annual recurring income, the firm said.
Temasek said it will remain focused on senior-secured structures designed to provide downside protection, while building a diversified lending portfolio across corporate lending, asset-backed financing and real estate credit to reduce concentration risk.
The firm sees opportunities across multiple parts of the market, including direct lending, private equity-related financing and secondary transactions. “We see opportunities in primary origination, to be able to lend across strong credits, continue to have very strong underwriting on our loans, and continue to do cash loans,” Mehta said.
It also sees opportunities arising from liquidity needs among private equity firms. As sponsors look for financing solutions for portfolio companies. “Our business spans across credit and hybrid, which makes us a good partner for some of these PE firms to provide liquidity to their portfolio companies as they look for M&A and other opportunities,” Mehta said. “If we see more of a rebound happening in M&A, that could be an interesting opportunity for us to lean in.”
The firm also highlighted opportunities in the secondary market, where lower liquidity has allowed investors to selectively acquire existing loan portfolios. “Because of the lower liquidity, we can actually go in and buy some of these portfolios and pick and choose what we like within those portfolios,” he added.
Private credit is one of three areas Temasek has identified as key growth opportunities, alongside artificial intelligence and core-plus infrastructure. The firm said these sectors are supported by long-term structural trends and have the potential to deliver attractive risk-adjusted returns.
The expansion comes as private credit faces increasing scrutiny following rapid growth in recent years. Concerns over liquidity, transparency and underwriting standards have intensified after redemption requests at some semi-liquid private credit funds, particularly those serving wealthy retail investors, raised questions over how certain vehicles would perform during periods of market stress.
