The firm is also raising a regional special situations fund.

Ares Management is planning to establish its first Asia local currency private credit fund in Thailand, according to sources familiar with the matter, as the country emerges as a new market for the asset class.

The proposed vehicle will focus on performing credit, targeting high-quality corporates in Thailand, the sources said, who asked not to be identified discussing private matters. The fund plans to raise capital primarily from insurance firms operating in the country and earning revenues in Thai baht, the sources added.

Details and plans are preliminary and could change, the sources said. A spokesperson for Ares declined to comment.

Thailand has emerged as a new frontier for private credit in Asia, as local banks, still burdened by non-performing loans from the auto and housing sectors, have become increasingly selective in extending credit, sources familiar said. About US$4.4 billion of bonds from Thai developers are due this year, according to data from trade group Thai Condominium Association, creating an opportunity for private lenders.

Establishing a local currency fund allows private credit firms to better match their cost of capital with domestic lending opportunities, the sources said.

Ares’ fundraising comes amid rising investor interest in Asia-based private credit funds, which are seen as a possible hedge against turmoil in the US$1.8 trillion asset class. Concerns have intensified in recent weeks, with investors unsettled by the potential impact of artificial intelligence on certain borrowers and mounting worries over valuations.

Ares, which oversees US$623 billion of assets globally, hired former CapitaLand Investment executive, Gabriel Fong, as a partner for Asia credit earlier this year. The firm is also raising a regional special situations fund, targeting at least the US$2.4 billion secured by its predecessor in 2023.