Private credit is experiencing a significant surge in activity, particularly within emerging markets, driven by infrastructure investments and fueled by a global appetite for alternative financing. This burgeoning trend is reshaping the landscape of debt financing worldwide, with notable investments flowing into India, Southeast Asia, Eastern Europe, and the Middle East. The global private credit market, currently accounting for less than 10% of the $1.7 trillion market, is witnessing a substantial expansion, reflecting shifting investor sentiment and a growing recognition of the potential benefits of emerging markets.
A key driver of this expansion is the ambitious infrastructure push spearheaded by Prime Minister Narendra Modi in India. This initiative has dramatically increased the demand for funding across sectors, including solar power and road construction, attracting substantial investment from global players. For example, Shapoorji Pallonji Group, a leading real estate and construction conglomerate, secured a $3.4 billion financing package from Ares, Cerberus Capital Management, Davidson Kempner Capital Management, and Farallon Capital Management, largely due to this infrastructure focus. Similarly, Apollo Global Management provided $750 million for Mumbai’s airport, another testament to the growing opportunities in the region.
The rise in private credit activity is also linked to a global trend of investors seeking diversification and higher returns, a strategy increasingly influenced by the relative strength of emerging markets. This reflects a move away from the dominance of US assets, as observed by Jeff Schlapinski, Managing Director of Research at the Global Private Capital Association, acknowledging that the expansion of private credit in EM is still in its early phase compared to the rapid growth experienced in the US. Investors are now recognizing the potential for outsized gains in markets with different economic cycles and growth prospects.
Several significant deals have underscored this shift. Superbet, a Romanian sports betting and gaming platform, secured €1.3 billion ($1.5 billion) from Blackstone and HPS Investment Partners, highlighting the growth and opportunity within Eastern European markets. Simultaneously, Southeast Asia recorded $1.1 billion in private credit transactions, indicative of the region’s increasing importance as an investment destination.
Furthermore, the launch of specialized funds designed to access local capital is amplifying the trend. Just this month, Aspire11, an investment platform backed by Czech financial group Partners, launched a €500 million fund to channel pension savings into startups and venture capital, a key step in bolstering private credit within specific regions. India’s EAAA India Alternatives Ltd. raised 45 billion rupees ($510 million) for its first private credit fund, demonstrating a growing interest in dedicated private credit vehicles. In the Middle East, Saudi Arabia’s Public Investment Fund anchored a series of new funds brought by Goldman Sachs Group Inc.’s asset management unit, focusing on private credit and public equity strategies across the Gulf Cooperation Council, reflecting the region’s burgeoning economic growth and financial activity.
The advantages driving this movement include the agility that private lenders offer, which allows for more flexible deal terms and greater confidentiality, a significant differentiator compared to traditional financing sources. However, private credit comes with a cost, typically higher than publicly-syndicated debt. Jugeshinder Singh, Chief Financial Officer at Indian conglomerate Adani Group, noted that private credit accounts for approximately 2% to 3% of its total debt book, and it’s occasionally used for shorter-term working capital due to this cost. This reflects the value investors place on the specific advantages of private credit.
The growing investor confidence is also bolstered by the positive performance of public emerging market assets. Stock markets in emerging economies, such as those in Indonesia, South Korea, and Turkey, have surged nearly 25% this year, and hard-currency bonds have returned nearly 9%, further incentivizing investment in private credit. Yaser Moustafa, Head of Emerging-Market Private Investments at Janus Henderson Investors, highlighted that both the opportunity and returns from investing in private credit have never been better.
Looking ahead, key factors to watch include China’s PMIs and industrial profits data, which could impact the broader Asian economic landscape, and the Reserve Bank of India’s likely interest rate decisions, influenced by inflation, the impact of US tariffs, and expected Fed cuts in September. Parliamentary elections are scheduled to be held in the Czech Republic on October 3-4, which may introduce some uncertainty. The overall trend suggests a substantial and sustained expansion of private credit within emerging markets, driven by infrastructure demands, investor diversification, and the inherent advantages of this financing model. Bloomberg L.P. remains the source of this information.
