Key facts
- 42% of institutional investors plan to increase private credit allocations to emerging markets in the next two years.
- The global private credit market is valued at approximately $3.5 trillion.
- Currently, less than 6% of respondents' private credit portfolios are allocated to emerging markets.
- Over 70% of investors perceive higher risk in emerging-market private credit compared to developed markets.
- A record $22.3 billion was invested in emerging market private credit last year.
- Middle Eastern investors show the highest allocation to EM private credit, with over 90% participating.
A survey by emerging markets asset manager Gemcorp indicates a significant shift in investor sentiment towards private credit in developing economies. Nearly half of institutional investors surveyed plan to increase their allocations to emerging market private credit over the next two years, a move that could channel substantial investment into these regions.
The survey, which polled 250 investment decision-makers across 22 countries, revealed that while only a small fraction of current private credit portfolios (under 6%) are allocated to emerging markets, this is set to change. Despite over 70% of respondents acknowledging higher perceived risk in emerging markets compared to developed ones, a record $22.3 billion was already invested in the sector last year.
Concerns over rising defaults in developed world private credit, viewed as a significant challenge by over half of those polled, may be contributing to the increased interest in emerging markets. Regional deployment varies, with Middle Eastern investors showing the highest participation (over 90%) and rating Africa as a particularly attractive destination (57%). Gemcorp suggests that a lack of understanding of structural protections available in emerging market private credit may be a key barrier for some investors.