Nearly half of investors plan to boost EM private credit – Gemcorp survey
About 42% of institutional investors intend to increase their private credit allocations to emerging markets over the next two years, according to a Gemcorp survey. This shift follows a record $22.3 billion in private credit inflows to emerging markets last year, as reported by the Global Private Capital Association, while developed market defaults rise.
Why are investors shifting toward emerging market private credit?
Rising defaults in developed markets are driving investors to seek alternatives. According to the Gemcorp survey of 250 investment decision-makers, more than 90% of respondents view rising defaults as a challenge. Just over half of those polled specifically rated developed world default rates as a “significant” challenge.
This instability creates a vacuum that emerging markets (EM) are beginning to fill. While the Alternative Investment Management Association values the global private credit market at roughly $3.5 trillion, only a small fraction of that capital currently reaches developing nations.
What barriers prevent more investment in developing nations?
Risk perception remains the primary obstacle. More than 70% of survey respondents expect higher risk in emerging-market private credit compared to developed markets. This sentiment persists despite the growth in actual capital deployment.
Felipe Berliner, Gemcorp’s co-founder and head of structuring, stated in the report that this view is often misunderstood. Berliner noted that investor perspectives change as they become more familiar with the asset class. He added that only a minority of investors believe they fully understand the structural protections available within emerging market private credit.
The gap between perception and protection
The disparity between perceived risk and structural reality often stems from a lack of familiarity with local legal frameworks. When investors utilize specific structural protections, the risk profile of EM credit can shift, potentially offering better risk-adjusted returns than saturated developed markets.
How does regional appetite for EM credit differ?
Investment appetite varies sharply by geography. Middle Eastern investors lead the trend, with more than 90% already allocating to EM private credit. In contrast, only 42% of North American respondents have made similar allocations, according to Gemcorp data.
This regional divide extends to specific destinations. Some 57% of Middle East-based respondents rated Africa as an attractive investment destination, nearly double the overall survey average of 28%.
| Investor Region | EM Allocation Rate |
|---|---|
| Middle East | >90% |
| North America | 42% |
What happens next for global private credit?
The current trend suggests a gradual redistribution of the $3.5 trillion global market. With average EM allocations currently sitting below 6%, there is significant room for growth if institutional investors—including pension funds, insurers, and family offices—overcome their risk aversion.
The record $22.3 billion inflow last year indicates that the “proof of concept” phase is ending. As more North American and European funds adopt the strategies already common in the Middle East, emerging markets may see a sustained increase in much-needed infrastructure and corporate investment.
Frequently Asked Questions
It refers to non-bank loans provided by institutional investors to companies or governments in developing economies.
According to the Global Private Capital Association, a record $22.3 billion was invested in emerging markets last year.
Gemcorp data shows over 90% of Middle Eastern investors allocate to EM, with a particularly high interest in Africa (57%), likely due to closer geographic and economic ties.
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