Private credit deals flood EMs

A RECORD wave of private credit deals across emerging markets (EMs) looks set to extend this year, with a host of institutional and sovereign wealth investors seeking to diversify their US-focused portfolios.

Funds such as Gemcorp Capital Management and Ninety One Plc are planning to raise billions for new private credit strategies in 2026 and increasingly report interest from pension, insurance and sovereign players. 

That follows a string of such deals last year by the likes of Abu Dhabi’s Mubadala Investment Co and Saudi Arabia’s Public Investment Fund, often in partnership with global names such as Apollo Global Management. Industry figures put 2025 as easily the biggest year on record.

The sector is still seen as under-penetrated given EMs have accounted for just 4% of global private credit fundraising since 2008, with private equity sponsored US deals making up the bulk of the US$1.7 trillion industry.

And the risks are growing in the United States, from cut-throat competition and concerns over worse terms to a weaker dollar and threats to the Federal Reserve’s (Fed)independence.

“Across the board we have seen a pickup of international interest, and we think all the sovereign funds from the African continent as well as from the Middle East are key targets,” says Felipe Berliner, co-founder and head of structuring at Gemcorp. “We can get significant returns for better credit metrics in EMs.”

For EMs, this trend should offer greater access to global capital, though costs can be higher than public markets.

For investors, their concentration of bets in the United States has also come into question following some high-profile bankruptcies, with JPMorgan Chase & Co’s CEO Jamie Dimon warning of more “cockroaches” lurking. 

Saturation in the United States and Western Europe means more capital is flowing into Asia, a destination that fits from a regulatory perspective for insurance companies and pension funds, Berliner says.

Africa is also attracting interest for infrastructure financing, where there’s strong demand and little existing money available, he says.

Gemcorp, which announced a deal with Angola’s wealth fund the Fundo Soberano de Angola last month, aims to deploy at least US$1bil into Africa this year.

“For every dollar you invest in Africa the impact is tremendous, and you probably get more impact for that dollar than you do in other markets,” says Abi Mustapha-Maduakor, chief executive of the African Private Equity and Venture Capital Association.

Still nascent

In Latin America, private credit is still nascent. Fundraising through the third quarter of 2025 totalled just US$1.3bil, down from US$3.6bil in 2024, according to LAVCA, a Latin America private capital trade group.

But figures in the region are up from where they were roughly a decade ago. And in a Preqin survey of Latin America limited partners released in August, 58% says they see private credit as the asset class presenting the best opportunities over the next 12 months.

Mubadala Capital, the investment arm of Abu Dhabi’s sovereign wealth fund, sees opportunity in Latin America.

The firm has secured about US$240mil in commitments for its latest Brazil vehicle, according to a June regulatory filing, after closing a US$710mil fund in 2023 focused on special situations in the country.

Panama’s sovereign wealth fund has zeroed in on alternatives as a key part of its strategy. In a March statement outlining its most recent full-year results, it listed expansion into alternative investment, including private debt, as a priority “to enhance diversification and inflation protection.”

Stampede risk

Of course, emerging markets can still be more risky than developed markets, with differing legal frameworks. Investors can be penalised if they don’t do the necessary due diligence.

“You have a lot of excitement and there’s a market dynamic where everybody’s afraid of missing out. People have a tendency of stampeding into the market too quickly and in emerging markets, that’s very dangerous,” says Morris DeFeo, the chair of the corporate department with New York-based law firm Herrick Feinstein LLP, who has advised companies both in the United States and the developing world for over 40 years.

One problem is that the distinction between the private and public sector is sometimes blurred in EMs, he says.

Often government officials or ruling families could control a company with a degree of sovereign protection, making it hard to enforce a judgment against them.

Conversations starting

Still, this is not stopping the flow of money. Ninety One, for instance, is aiming to launch a new fund later this year and is targeting US$1bil from institutional investors.

“There is a growing desire to add some diversification at the margin to portfolios,” says Nazmeera Moola, chief commercial officer at the firm, which oversees about US$215bil.

A challenge for sovereign players is expectations for returns in the high teens, she says. “Ironically, even when you have sovereign wealth funds out of emerging markets, their preference has been to do private credits in the US,” she says.

“A year ago they were not interested in talking about emerging market private credit, whereas at the back end of last year we were starting to have the conversations.” — Bloomberg