Institutions Boost Emerging Market Private Credit Amid Developed Market Default Concerns

Institutional investors are increasingly targeting emerging market private credit, with 42% planning to boost allocations over the next two years, driven by rising default risks in developed markets. This potential reallocation could bring significant capital inflows to developing nations, according to a survey by Gemcorp published June 17, 2026. Despite a global private credit market valued at approximately $3.5 trillion, less than 6% of institutional portfolios are currently allocated to emerging markets, and 40% have no exposure. Over 70% of respondents perceive emerging market private credit as riskier than developed counterparts. However, investor sentiment is shifting as over 90% view rising default rates as a major challenge in the broader private credit market, with more than half citing increasing developed market defaults as a "significant challenge." Emerging market private credit saw record inflows of $22.3 billion in 2025, per Global Private Capital Association data, as investors seek diversification. Middle Eastern investors show the highest acceptance, with over 90% having allocated to the asset class, compared to 42% in North America. Challenges include political risk, currency volatility, and liquidity concerns.