A growing share of institutional investors plan to raise allocations to emerging markets private credit over the next two years, despite persistent concerns over risk and limited current exposure, according to a report by Reuters citing a new survey by Gemcorp.
The study by the emerging markets asset manager found that 42% of institutional investors intend to increase their exposure to private credit in developing economies, highlighting potential momentum for capital inflows into a relatively under-penetrated segment of the $3.5tn global private credit market.
Despite this expected increase, current allocations remain limited. On average, respondents reported that fewer than 6% of their private credit portfolios are invested in emerging markets, while around 40% said they have no exposure to the asset class at all.
The survey, which polled 250 investment decision-makers across 22 countries, suggests that perceived risk continues to be the primary barrier to broader adoption. More than 70% of respondents expect emerging markets private credit to carry higher risk than developed market equivalents, while concerns about rising defaults across private credit more broadly are also shaping sentiment.
Investor caution has been reinforced by recent stress in parts of the developed market private credit sector, where default rates have been climbing and liquidity conditions have tightened. Nevertheless, survey respondents indicated that greater familiarity with structural protections and deal structures in emerging markets could help narrow the perception gap over time.
Regional differences were also pronounced. Investors in the Middle East showed significantly higher engagement, with more than 90% already allocating to emerging markets private credit, compared with 42% of North American respondents. Africa in particular was viewed as an attractive destination by 57% of Middle East-based investors, well above the global average of 28%.
According to data cited in the report, deployment into emerging markets private credit reached a record $22.3bn last year, underscoring gradual but steady growth in allocations despite broader caution across private markets.
