Emerging Market Infrastructure Debt Fund

Emerging Market Infrastructure Debt Fund: Contracted Returns from Essential Assets

Infrastructure debt sits at the intersection of fixed income and real assets: it is structurally secured against productive hard assets, backed by long-term contracted or regulated cash flows, and denominated in hard currency — but accessed in markets where the combination of political complexity, development risk, and capital scarcity creates pricing premiums unavailable in developed market equivalents.

This fund provides senior and subordinated debt to infrastructure projects across sub-Saharan Africa, South and South-East Asia, and Latin America, targeting net IRRs of 9–12% over a ten-year closed-end fund life. The fund does not take equity risk in projects — it is a debt instrument with priority claim on project cash flows and security over the underlying assets.

Why Emerging Market Infrastructure Debt?

The global infrastructure financing gap is well-documented: the Asian Development Bank estimates that Asia alone requires $1.7 trillion in infrastructure investment annually, while Africa's infrastructure deficit runs to hundreds of billions of dollars per year. Multilateral Development Banks (MDBs) and Development Finance Institutions (DFIs) — the IFC, ADB, the US DFC, British International Investment, DEG — cannot close this gap alone. They increasingly rely on private capital to co-lend alongside them, using their preferred creditor status and political risk mitigation tools to de-risk transactions for private investors.

This creates an attractive opportunity for private infrastructure debt funds: access to high-quality, DFI-vetted projects with MDB co-lending status, political risk insurance, and USD-denominated cash flows — at interest rate spreads significantly wider than equivalent developed market infrastructure debt.

Strategy and Loan Types

Power generation (approximately 30–40%): Senior and subordinated debt to renewable and conventional power plants — solar, wind, hydro, and natural gas peakers — in markets with verified power purchase agreements (PPAs) from creditworthy national utilities or industrial offtakers. Power is the foundational infrastructure asset: every other productive activity requires reliable electricity, and power deficits are the single largest constraint on economic growth across sub-Saharan Africa and South Asia.

Water and sanitation (approximately 15–20%): Debt to water treatment, desalination, and water supply concessions. Water assets are long-lived, quasi-monopoly assets backed by government concessions or regulated tariff frameworks. In the Middle East, North Africa, and parts of South Asia, water scarcity is structurally worsening, creating durable investment themes.

Transport infrastructure (approximately 20–25%): Toll roads, bridges, ports, and logistics infrastructure with contracted revenue frameworks. Transport infrastructure benefits from population growth, urbanisation, and trade volume growth in target markets.

Digital and telecoms (approximately 15–20%): Mobile tower infrastructure, data centre lending, and fibre backbone debt. Emerging market digital infrastructure is experiencing rapid demand growth driven by mobile internet penetration, with revenue backed by long-term tower lease agreements from mobile network operators.

Deal Access and DFI Co-Lending

A key competitive advantage for the fund is its co-lending relationships with DFIs and MDBs. When the International Finance Corporation (IFC), the African Development Bank, or British International Investment leads a project financing, they bring:

• Preferred creditor status reducing the probability of loan default or forced renegotiation
• Political risk insurance covering expropriation, currency inconvertibility, and political violence
• Environmental and social governance (E&S) due diligence under IFC Performance Standards
• Country relationship leverage that commercial lenders operating independently cannot replicate

The fund participates in syndicated tranches alongside DFIs, benefiting from their deal origination, due diligence infrastructure, and country relationships — while earning the higher spread available on the private commercial tranche versus the concessional DFI tranche.

Currency Management

All fund loans are denominated in USD or EUR, regardless of the project's local currency of operation. Borrowers bear the FX risk, typically mitigated through a combination of USD-denominated project revenues (power and transport infrastructure revenues are often USD-indexed under PPA terms), currency swap facilities arranged by the fund, and DFI-backed partial credit guarantee structures.

This hard-currency approach significantly reduces the fund's exposure to local currency devaluations — a key risk in many emerging market economies.

Risk Considerations

Political and sovereign risk: Infrastructure assets in emerging markets are subject to political risk including government policy changes, renegotiation of contracts, expropriation, and changes to the regulatory environment. The fund mitigates this through DFI co-lending, political risk insurance, and geographic diversification across 15–20 countries.

Construction and completion risk: Projects under construction carry the risk of delay, cost overrun, or technical failure before operations begin. The fund focuses primarily on operational or near-operational projects where construction risk has been substantially de-risked, with construction-phase lending limited to approximately 20% of the portfolio.

Offtaker risk: The fund's returns depend on infrastructure operators receiving contracted payments from their offtakers — utilities, governments, or industrial customers. Offtaker default or renegotiation is a material risk, particularly in markets with weak public finances. The fund structures loans with reserves and covenants that provide early warning of offtaker stress.

Currency inconvertibility risk: Even USD-denominated loans face the risk that a government restricts the conversion of local currency into USD for debt service payments. Political risk insurance provides a partial hedge, but coverage limits and insurance provider risk remain.

Illiquidity: Ten-year closed-end fund. No secondary market for interests. Investors commit for the full term.

Suitability

This fund is appropriate for institutional and sophisticated investors seeking a premium-yield, USD-denominated allocation to real assets in high-growth emerging markets. The asset class suits investors with the risk tolerance for illiquidity and political complexity, a USD reporting requirement, and a long investment horizon. It is not appropriate for investors seeking short-term liquidity or exposure to a single geography. Minimum investment $250,000.

How to Invest

Contact our investment team to receive the fund's private placement memorandum, country allocation framework, DFI co-lending documentation, and sample project term sheets. Full professional investor qualification required. Minimum investment $250,000.

Important: Capital is at risk. Past performance is not a guarantee of future returns. Emerging market investments carry additional political, currency, and liquidity risks. This is for information purposes only and does not constitute a personal recommendation. Seek independent financial advice before investing. This fund illustrates the type of emerging market infrastructure debt opportunity Global Investments advises on — it is not a live investment offer.