Private credit cash pivots from ‘risky’ West

An intricate series of pipes off Angola's Atlantic coast snakes towards a new fuel refinery that signals the country's push for energy independence - and its use of private creditors, instead of banks, to fund a big-ticket project.

- LIBBY GEORGE RODRIGO CAMPOS

"We're not the lender of last resort," said Felipe Berliner, co-founder of emerging markets asset manager Gemcorp, which provided the bulk of funding for the refinery, using private capital. "Sometimes we are the only lender." Private credit for emerging markets - driven by investors' hunt for yields and saturation in developed Western markets - could grow exponentially, veteran investors told Reuters, providing tens of billions in funding as bilateral lending and foreign aid shrink.

"This is a paradigm shift," said Pramol Dhawan, head of emerging markets portfolio management at Pimco. "The need to globally reallocate is not a hedge - it's a secular thesis."

Pimco has committed around $30 billion across 140 emerging market deals in five years and expects to boost annual lending by 30% this year to $10 billion. Other investors are targeting similar increases.

Private credit skyrocketed over the past 20 years, with global assets under management rising to over $1.2 trillion from $200 million in the early 2000s, according to the Bank for International Settlements.

The funding filled a gap for companies, mainly in the US, as banks limited lending due to regulations and capital requirements.