Alternative credit markets are gaining attention. A confluence of factors, including shifting behaviour in traditional asset classes, the search for differentiated income and persistent mispricing of risk is drawing allocators toward less trafficked areas of the market.
While alternative credit is a broad and evolving universe, this article focuses on one area that is rising on institutional radars: emerging market (EM) private credit.
For investors seeking repeatable, risk-adjusted returns in undercapitalised markets, the case is becoming harder to ignore. Built over nearly two decades, Ninety One’s EM credit platform has helped shape this evolution, deploying over $15 billion in capital and demonstrating that well-structured private lending in these markets can be both resilient and rewarding.
Ninety One began building its credit platform in South Africa during the global financial crisis. At the time, credit was often treated as a sub-category of fixed income, or a tactical supplement to sovereign bonds. Our approach was different: to treat credit as an asset class in its own right, with dedicated portfolios, specialist teams and a long-term investment focus.
That early work focused on corporate lending and sticky cash portfolios, delivering cash-plus-2% returns with low volatility. The turning point came during the financial crisis, when international capital retreated and high-quality South African borrowers were left stranded. We stepped into that gap, underwriting senior loans at attractive valuations and laying the foundation for a more compelling, high-yielding credit strategy named Credit Opportunities
From those beginnings came the African Credit Opportunities strategy for international investors looking to secure uncorrelated hard currency returns off the platform using the underlying DNA. This led to the awarding of the Emerging Africa & Asia Infrastructure Fund (EAAIF), backed by a consortium of global development finance institutions, and more recently the SA Infrastructure Credit Fund. All are built on the same foundation: senior secured lending to essential businesses and infrastructure, with downside protection through security packages, covenants and direct engagement.
Today, the platform manages over 1,200 investments, with 11 fund vintages across our emerging market credit strategies now fully realised. Average credit losses across hard currency strategies have been less than 0.4% per annum, yet returns have been priced in line with sub-investment grade credit. That spread between perceived and actual risk is a persistent feature of EM private credit.
Several structural shifts are drawing attention to the asset class. Infrastructure needs in fast-growing economies, capital shortfalls in energy transition finance, and a retreat by global banks have created a lasting supply-demand mismatch. The deals are often too complex, too small or too jurisdictionally nuanced for mainstream lenders. However, for specialist platforms, they remain accessible and often mispriced.
In these markets, pricing power still resides with the lender. Typical transactions involve two to three turns of leverage (of EBITDA), secured on hard assets or essential cash flows. By contrast, developed market private debt often involves five to seven turns of leverage and looser terms. Measured against that backdrop, emerging market private credit offers comparable returns with materially lower financial risk.
The success of Ninety One’s EM credit platform owes much to its origination model. Over time, we’ve built a proprietary network of more than 500 sourcing partners across EM. That reach allows us to uncover deal flow that rarely appears in syndicated or brokered markets. Our team of over 40 investment professionals, based in Cape Town, London, New York and Singapore, includes deep legal and ESG specialists to assess each transaction directly.
This enables us to move quickly when capital is needed and to underwrite with control and consistency. Portfolios typically combine senior private credit with infrastructure debt. In markets like Vietnam, Kenya and Peru, we’ve backed renewable energy developers, logistics hubs and public-private partnerships. Deal sizes typically range from $15 million to $50 million, below the threshold for global asset managers, but significant within their local context.
The result is a portfolio of real-economy assets, often essential to national development priorities, and structured to deliver stable, compounding returns in dollars.
Despite Ninety One’s track record of less than 0.4%, the broader industry data also suggests an opportunity. Default rates in EM private credit remain modestly above those in developed markets, while recovery rates are directly comparable. The net result is an average annual credit loss of around 1% industry-wide, only 0.2% to 0.3% wider than that in more developed markets, at 0.7%.
Asset-backed structures, conservative leverage, tight covenants and active monitoring provide multiple layers of defence. In our experience, the stability of returns matters more than the headline yield. Whether delivering 9% or 13% in dollars, the objective is consistent: preserve capital, compound income, and reinvest in deals where risk is clear and pricing is in our favour.
Emerging market private credit offers a risk-aware way to diversify income exposure but remains underrepresented in global portfolios. Just 3% of private credit flows into emerging markets. Yet, the conditions that have defined this opportunity for nearly 20 years still hold: capital scarcity, disciplined underwriting and limited competition.
For long-term allocators, it’s more than a yield enhancement. It’s a chance to build resilience into portfolios and allocate to productive, undercapitalised parts of the market.
This article is based on a panel discussion at our In Perspective Global Forum. The discussion, “Finding opportunity in alternatives,” was moderated by James Elliot, CIO, Client Solutions at Ninety One, in conversation with: Nathaniel Micklem, Co-Head of Emerging Market Alternative Credit, Justin Jewell, Co-Head Developed Markets Specialist Credit, Olivia Carballo, Managing Director, Emerging Market Fixed Income and Lei Lei, Co-Head European Credit Opportunities.