KKR & Co and Abu Dhabi state fund Mubadala Investment Co said they had entered into an agreement to invest about $1 billion in Asia.

The agreement, announced on Sunday, will see the two firms investing across performing private credit opportunities in the Asia Pacific region.

Mubadala, which manages $243 billion in assets, said in a joint statement it would deploy its capital alongside KKR’s existing pools of capital, including capital from the KKR Asia Credit Opportunities Fund, a $1.1 billion credit investment vehicle KKR closed in May.

"Expanding into the Asia Pacific region is a core pillar of our strategy as this market presents unique credit investment opportunities, driven by its rapid growth and high demand for non-bank capital," Omar Eraiqaat, co-head of credit investments at Mubadala, said in the statement.

Private credit funds have gained traction in Asia in the last few years as companies tap into alternative sources of funding although banks still account for the bulk of financing.

Investors are drawn to credit funds for potentially higher returns.

In APAC, KKR has deployed nearly $3 billion in credit capital since 2019. The credit business in the region is part of KKR’s about $178 billion global credit platform.

(Reporting by Mrinmay Dey in Bengaluru and Selena Li in Hong Kong; Editing by Maju Samuel)