A trillion-dollar asset class was reaching almost everywhere except where the capital was needed most.
Private debt had exploded across the rich world and barely touched the developing markets it could transform, and no one had mapped why.
Location / capital-markets photographyThe International Finance Corporation (IFC), the World Bank Group’s private-sector arm, has a standing problem it calls working Upstream: too little private capital reaches the businesses in developing markets that need it most, because there are too few bankable opportunities for that capital to flow into. Debt funds are one of the answers. Where banks have pulled back from lending to smaller companies, these funds channel institutional money into private credit, and by one estimate between 40 and 60 per cent of the companies in their portfolios worldwide could not have raised bank finance at all.
The IFC had already built a framework for investing in the asset class, but it was working nearly blind: it needed to know where these funds existed, how they were built, who ran them, and which markets were ready for its money. It asked us to map the global debt funds industry, with the emphasis squarely on the developing markets of Asia, Latin America and Africa.
- Framework development
- Market & landscape analysis
- Benchmarking
- Trend analysis
- Regulatory & legal analysis
- Investment risk analysis
- Interviewing
- Desk research
- Verification & triangulation
- Recommendation & roadmap design
- Synthesis & report writing
- Knowledge-product & toolkit creation
ClientOne basis. Five regions.
1 Market data as at 2021.
The barriers weren’t incidental. They were structural.
The asset class was not small. Private credit had quadrupled since the financial crisis to more than 1.2 trillion dollars. The trouble was where all of it had gone: almost entirely to North America and Europe, and barely at all to the emerging markets that needed the capital most. That was not an accident of history. Private debt had grown up on foundations the developed world happened to have and the developing world largely did not: private-equity sponsors to originate and de-risk deals, deep pools of pension and insurance capital to fund them, and courts that would enforce a loan when it soured.
Take those away, as most emerging markets do, and the same rational manager who thrived in Chicago or London finds the deals harder to source, the money harder to raise, and the losses harder to recover. So capital pooled where the plumbing already worked and stayed away from where it did not. The barriers were structural, not incidental, and until the asset class had been mapped market by market, the IFC could not tell which were fixed and which could be moved.
How we pulled it together
We fixed the brief before we answered it.
The terms of reference asked us to measure the track record of debt funds worldwide, and left the words “debt fund” loose enough to mean almost anything. We said so at the outset. Reliable performance data on thousands of closed, private funds across the globe was not realistically obtainable, so we told the client to drop that requirement rather than pretend, and narrowed the definition to the funds that actually issue debt before the research began.
We built the map’s legend before we drew the map.
Across the industry “private debt” and “private credit” are used interchangeably, which makes a global comparison meaningless before it starts. So we set the taxonomy ourselves: what counted as private credit against the wider private debt universe, how each strategy was defined, where the mid-market began in a region that drew the line differently from the next. Every figure then rested on the same definitions.
We reported the markets the data ignores.
The reporting on this asset class concentrates on North America and Europe, because that is where the money and the record-keeping are. The IFC’s interest ran the other way: Asia, Latin America and Africa, where the funds are few and the data is thin or private. We built every region to the same template regardless, and drew on the market directly where the published data ran out.
We turned the barriers into a to-do list.
It would have been enough to describe why private debt struggles in developing markets. We went further, pinning each barrier to the markets and fund types it hit and setting a specific fix against it: where a banking licence blocked non-bank lenders, where weak insolvency law left a lender exposed, where pension rules shut out the local capital the funds needed. What the IFC received was a list of things that could be moved.
We handed over a shortlist, not just a survey.
A market overview tells you the shape of a thing; it does not tell you who to call. So beneath the analysis we mapped the emerging-market managers themselves, each placed by geography and strategy, so the IFC could move from reading about the asset class to looking at named candidates for its own money. The review was commissioned to build an investment pipeline within eighteen months, and we built the start of that pipeline into the report.
What we delivered
A review of a private, fragmented asset class turns on two things that cannot be delegated: whether the data coming back is actually true, and whether the read of a thin market is a sound one. Much of the work beneath that can be delegated, and was; a team of analysts did the gathering and the compiling. What the seniors kept in their own hands was the part that decides whether the review is worth anything: validating what came back, and speaking to the market directly.
Thierry Clarke ran the analysis and wrote the review himself rather than handing it down. He had spent his career inside the institutional investment world the review was about, running institutional and intermediary business across more than twenty emerging markets before InvestorConnected, and working with the pension funds, insurers and asset managers who are both the investors in these funds and the audience for the report. That grounding let him impose a taxonomy the industry would accept, read a thin emerging-market picture without being misled by it, and tell the IFC where its own brief was asking for the impossible.
Tsvetelina Zapryanova ran the coordination and, with the analysts beneath her, the gathering of the data, and carried the direct liaison with counterparties across the regions. Where the published record thinned out, the answer came from picking up the phone to managers and market participants rather than trusting a figure no one had tested. The review was delivered in-house from end to end: the analysts did the legwork, the seniors owned the judgment, and no part of it was worth handing outside.
Thierry Clarke
Tsvetelina Zapryanova
