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How Active Are Private Debt Fund Managers in Emerging Markets? – October 2015

by Thomas Mulready

  • 21 Oct 2015
  • PD

Preqin’s Private Debt Online database provides data on the fundraising activities of 1,513 private debt funds closed historically. Since the year 2000, 88 private debt funds which specifically focus on emerging markets have been raised. Preqin data shows that funds which focus on the emerging markets sector make up the smallest proportion of private debt funds raised. However, is there potential for this market to grow? And which particular emerging economies are fund managers focused on?

The chart above provides a breakdown of the historical location preferences of funds focused on emerging markets. Asia has been the primary geographic focus for many fund managers, with 55% of emerging markets-focused funds investing in the region. India in particular appears to be providing valuable opportunities, with 36% of Asia-focused funds investing in the region. This is unsurprising given that India is considered one of the fastest growing economies in the world with the potential for strong future growth. Preqin data also shows that South Korea has experienced strong capital inflow, with 44% of emerging markets-focused funds having had some exposure to the region.

South Africa remains the most attractive destination for Africa-focused funds, with 47% of Africa-focused maintaining a sole focus on the country. This is most likely due to the fact that South Africa has one of the most developed economies in the region and offers investors less risk compared to the less stable economies of its neighbouring countries.

Despite the ongoing conflict in the Middle East, Israel’s growing technological sector offers strong investment opportunities for managers. Preqin data shows that 66% of funds that have invested in the country have focused on technological industries. 

For those willing to manage the risk there appears to be some promising opportunities available. Preqin’s historical fundraising data shows a steady increase in the number of private debt funds focusing on emerging markets. The number of emerging markets-focused funds peaked in 2014 with the closure of nine private debt funds, the highest number of closures of any year so far. 2015 has seen eight emerging markets-focused private debt funds close, so there are certainly signs that interest in emerging markets may continue to increase.

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