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Phenix Capital: Private debt funds targeting emerging markets on the rise 

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Published: 6 July 2023

Almost 160 private debt impact funds in Phenix Capital’s impact database target SDG 1 by tackling poverty in emerging markets.

Phenix Capital: The number of private debt impact funds has grown by 219% since 2014, with the majority of them investing in emerging markets and targeting SDG 1 | Metamorworks on iStock.

The number of private debt impact funds has grown by 219% since 2014, with more than two-thirds (67%) of the total allocating to emerging markets, reflecting the key role played by private debt providers in regions where other lending sources are limited or costly to use, according to the latest report from Phenix Capital Group. 

The Amsterdam-based investment consultancy’s Impact Database shows 158 private debt impact funds focused on emerging markets targeting UN Sustainable Development Goal (SDG) 1, aimed at eradicating poverty. Private debt funds comprise around 15% of the total number of funds in the database. 

In developing countries, SMEs that struggle to access debt from traditional banks or finance institutions, must instead turn to private debt provided by microfinance institutions or trade finance funds on more affordable borrowing terms.   

Global and developed market private debt funds are an important route for private institutional capital into emerging markets. An investing strategy based on private debt funds can also compare favourably with an equities strategy by offering regular cash flow, lower volatility and a relatively stable returns profile. It’s also a growing segment of the market, with 19 private debt impact funds due to launch shortly, according to Phenix. 

The consultancy cites the ILX Fund I, run by Dutch-based ILX Management, as one example of how working with multilateral development banks and development finance institutions is providing large-scale, diversified opportunities for institutional investors to invest in private debt mechanisms.  

The fund reached its target size of $1bn in June 2022, supported by a $750m cornerstone investment made by APG Asset Management, on behalf of pension fund clients ABP and bpfBouw.  

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