By Chiara Elisei
LONDON (Reuters) – Private credit and infrastructure investments across emerging and developing markets surged to record levels in 2022 as borrowers looked for alternative financing options amid rising interest rates, according to a report published on Wednesday.
The Global Private Capital Association (GPCA) said private credit investment saw the largest rise, growing by 89% to $10.8 billion in 2022 from the year before in Asia, Latin America, Africa, Central and Eastern Europe (CEE) and the Middle East.
Private credit is financing provided by a lender other than a bank, such as an investment fund.
Infrastructure deals increased by 36% to $37.8 billion in value, according to the GPCA, which represents investors in the sector who manage more than $2 trillion in assets.
As firms seek alternative financing options amid the fastest interest rate hikes in decades, private credit fund managers are finding a variety of opportunities to deploy capital, which also include non-performing and distressed loans, as well as senior and junior financing for middle-market businesses.
“There are persistent financing gaps unaddressed by global or local banks that private credit funds are helping to fill,” said Jeff Schlapinski, Managing Director, Research at GPCA.
Investments in energy transition assets doubled last year to $25.7 billion, GPCA said, with renewable energy assets and new electric vehicle startups seeing capital inflows.
Following a weak 2021, renewable power investments rose nearly threefold last year to $8.3 billion, with notable deals including the $400 million investment by private equity firm KKR in India-based Serentica Renewables.
Electric vehicles and automotive tech companies attracted the most investment in the sector at $13.7 billion.
“We are seeing electric vehicles deals in a host of new markets – it’s not just a China or U.S. or European story anymore,” Schlapinski added.
While the overall value of private capital investments declined by 22% from 2021 amid geopolitical and macroeconomic challenges, last year was still the second-highest on record going back to 2008, with fund managers deploying $208 billions across Asia, Latin America, Africa, CEE and the Middle East.
The Middle East was the only region that in 2022 saw an increase in overall private capital investment, rising 30% to $19.8 billion.
(Reporting by Chiara Elisei Editing by Yoruk Bahceli and Mark Potter)