1 minutes to read by  BlueBay Fixed Income team, M.Florian, P.Kurdyavko, CFA, I.Zyskind May 27, 2025

We discuss how – at a time of global uncertainty – investors in emerging markets private credit can benefit from enhanced yield and a compelling risk-reward balance.

Key points

• The illiquidity premium is the potential to harvest additional returns from investing in an illiquid vehicle. The longer-term investment horizon of a locked-up fund allows investors to access this premium.

• In emerging markets, the drivers for capturing the illiquidity premium are an overreliance on the banking sector by borrowers, shallow local debt capital markets relative to developed markets, and a lack of alternative pools of capital.

• Recent geopolitical events have enhanced the opportunity to capture the illiquidity premium. Investor risk appetite has diminished, further restricting EM borrowers’ access to traditional funding channels and creating an impetus to search for new funding alternatives, such as private credit.

• Due to a lack of competition for EM illiquid assets, our strategy offers a meaningful premium over more liquid instruments with a much shorter duration, given the underlying amortising nature of the loans we invest in.

Horizons Expanded: Harness emerging market opportunities across asset classes.

Disclosure

This material is provided by RBC Global Asset Management (RBC GAM) for informational purposes only and may not be reproduced, distributed or published without the written consent of RBC GAM or its affiliated entities listed herein. This material does not constitute an offer or a solicitation to buy or to sell any security, product or service in any jurisdiction; nor is it intended to provide investment, financial, legal, accounting, tax, or other advice and such information should not be relied or acted upon for providing such advice. This material is not available for distribution to investors in jurisdictions where such distribution would be prohibited.

RBC GAM is the asset management division of Royal Bank of Canada (RBC) which includes RBC Global Asset Management Inc. (RBC GAM Inc.), RBC Global Asset Management (U.S.) Inc. (RBC GAM-US), RBC Global Asset Management (UK) Limited (RBC GAM-UK), RBC Global Asset Management (Asia) Limited (RBC GAM-Asia), which are separate, but affiliated subsidiaries of RBC.

In Canada, this material is provided by RBC GAM Inc. (including PH&N Institutional), each of which is regulated by each provincial and territorial securities commission with which it is registered. In the United States, this material is provided by RBC GAM-US, a federally registered investment adviser. In Europe this material is provided by RBC GAM-UK, which is authorised and regulated by the UK Financial Conduct Authority. In Asia, this material is provided by RBC GAM-Asia, which is registered with the Securities and Futures Commission (SFC) in Hong Kong.

Additional information about RBC GAM may be found at www.rbcgam.com.

This material has not been reviewed by, and is not registered with any securities or other regulatory authority, and may, where appropriate and permissible, be distributed by the above-listed entities in their respective jurisdictions.

Any investment and economic outlook information contained in this material has been compiled by RBC GAM from various sources. Information obtained from third parties is believed to be reliable, but no representation or warranty, express or implied, is made by RBC GAM, its affiliates or any other person as to its accuracy, completeness or correctness. RBC GAM and its affiliates assume no responsibility for any errors or omissions in such information.

Opinions contained herein reflect the judgment and thought leadership of RBC GAM and are subject to change at any time. Such opinions are for informational purposes only and are not intended to be investment or financial advice and should not be relied or acted upon for providing such advice. RBC GAM does not undertake any obligation or responsibility to update such opinions.

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Past performance is not indicative of future results. With all investments there is a risk of loss of all or a portion of the amount invested. Where return estimates are shown, these are provided for illustrative purposes only and should not be construed as a prediction of returns; actual returns may be higher or lower than those shown and may vary substantially, especially over shorter time periods. It is not possible to invest directly in an index.

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© RBC Global Asset Management Inc., 2025

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