Private credit activity accelerated in emerging markets in 2022

GPCA report says private credit reached a record, besting private equity and venture capital, largely due to distressed opportunities.

A new report by the Global Private Credit Association has found that private credit investment accelerated in emerging markets in 2022, in contrast with venture capital or private equity activity.

The sector increased year over year to reach its highest level on record, at $10.8 billion, as private credit fund managers stepped up and into non-performing and distressed opportunities, especially in Asia and Latin America. The report covers activity in Asia-Pacific (excluding Japan, Australia, and New Zealand), Latin America, Africa, Central and Eastern Europe and the Middle East.

Infrastructure investment also hit a record high, of $37.8 billion. Private credit fund managers have played a part in financing infrastructure, with notable examples including Concesionaria Vial Unión del Sur, the concessionaire that maintains a critical highway in Colombia; Mumbai International Airport; and Genser Energy, an independent power producer in Ghana.

Private credit, however, remained a small portion of the broad private capital picture. In 2022, the asset class represented roughly 5 percent, or $10.8 billion, of the $207.9 billion of all private capital activity. But its share increased from the 3.8 percent, or $4.5 billion, of the total $166.3 billion in 2018.

Although overall deal volume for private capital fell 22 percent in 2022 from the previous year, at close to $208 billion, it remains the second highest on record. This is still a steep rise from the $166.3 billion total in pre-covid 2018.

Middle East deal activity bucked the general trend of decline – it strikingly increased in 2022. Activity in the region did not experience a covid-related slowdown in either 2019 or 2020, so has risen steadily since at least 2018, reaching $19.8 billion in 2022, a 30 percent uptick on the previous year.

GPCA, formerly EMPEA, Emerging Markets Private Equity Association, has also, separately, released its research on global trends in tech, focusing on venture capital investments. Here, too, the Middle East stands out. Overall VC investment in the GPC markets has declined 33 percent from 2021 to 2022. This decline is seen in all the geographical markets covered except the Middle East where the year-on-year change was positive at 12 percent.