Blackstone Fund’s Success Distracts From Institutional Under-Investment in Emerging Markets

The Asia III fund exceeded its target of $10 billion and marks Blackstone’s largest private equity fundraise in Asia. Combined with $7 billion of Asian investment by Blackstone over the previous two years, it represents a significant move into emerging markets by the world’s largest alternative asset manager. It’s not the only recent move like this, following on from EQT’s $15.6 billion Asia buyout fund, and signals a growing interest in the region.

“Asia’s developing economies are winning capital around,” says Rupin Banker, an infrastructure and supply chain finance specialist. “But investors still undervalue emerging markets, favouring familiar options over higher returns.”

The attention drawn by these funds reflects their exceptional nature. Institutional investors continue to under-allocate to emerging markets, despite their significant advantages. A Bain & Company report showed only $58 billion of private equity fundraising for Asia in 2025, the lowest level in over ten years. Similar patterns are visible in emerging markets around the world. Investors are under-investing in emerging markets.

On its most basic level, this bias is shaped by caution. Safe bets protect fund managers from criticism, even when they don’t pay off. SpaceX raised $85.7 billion because it was a known quantity, despite failed launches and controversy around its founder.

One expression of this caution is the well-known “home bias.” Most people favour domestic investments over foreign ones to an extent that far outweighs the risks. With so much capital based in Europe and North America, that bias leads to over-investment in those continents. Even when announcing the success of its Asia III fund, Blackstone emphasised investments in China, Korea, and India – not home markets, but ones that investors are comfortable with.

“Capital does not move because a market is interesting,” Rupin explains. “It moves when risk is clear, contracts are reliable and returns are realistic. Emerging economies have to work harder to prove that value, and that’s what we’re now seeing.”

This isn’t Blackstone’s first move in the region. Previous Asian investments include Indian AI cloud platform Neysa and Japanese engineering services firm TechnoPro, reflecting another strand of investor caution - a focus on technology. The scale and reputation of tech companies makes them seem like safe investments with high returns. This is especially true of the largest tech companies from the most powerful economies. According to a paper from Morgan Stanley, “Over the last decade, investors had eyes for only two countries, the United States and China, and one sector, tech.” While emerging markets include some tempting tech investments, they aren’t as large or established, and so struggle to overcome these biases.

This is reinforced by the misuse of benchmark indices. “These benchmarks were never designed to help you achieve your investment goals,” states a report by asset management firm Franklin Templeton. “They were designed to be trackable and measurable.” Treating these measures as targets narrows investors’ options, as it leads them to focus on the investments in those benchmarks, in preference to other opportunities that might provide better returns.

Many of those opportunities lie in emerging markets. Backing from the International Monetary Fund has reduced the risk of default in these countries, making them safer investment zones than they once were, and so attracting firms like Blackstone. Strong monetary policies and inflation targets mean that countries such as Brazil, India and Indonesia currently offer stable and growing opportunities. Contrary to some perceptions, this isn’t the wild west, but a group of countries with reliable central banks, strong legal systems, and effective trade policies. The stigma associated with them still deters some investors, leaving opportunities on the table for Blackstone to seize.

Emerging markets have more room for growth thanks to their starting point, and that’s shown in their performance. With 3.7% growth, they outperformed advanced economies in 2025. While some, such as Turkey, have higher inflation which undermines their potential, others offer better bets. Blackstone’s Asian investments include significant Indian businesses such as Aadhar Housing Finance and Neysa, a fast-growing AI cloud platform, giving investors access to that higher growth.

Neysa represents a particularly significant move within the Blackstone portfolio. While AI has brought most attention, and therefore investment, to companies in China, the US, and Korea, it’s an industry that’s growing across emerging markets. Companies there have access to a base of potential AI consumers and use cases that the larger players haven’t yet tapped. Local companies can provide their own versions of these services, customised to local markets or priced to seize broader markets as the bill for costly American AI comes in through rising token costs.

The same is true in other parts of the tech sector. From sub-Saharan solar power farms to Indonesian data centres, emerging markets are seizing the opportunities that technology has to offer, allowing local businesses to flourish.

Blackstone’s investment also represents a broader strategic move, diversifying the firm’s investments to create greater resilience. By spreading its funds widely, it reduces vulnerability to volatility in traditionally popular markets such as the US.

The erosion of the US dollar’s international value might prove a tipping point for emerging markets. While US investments can still yield good returns, political and trade instability mean that the dollar is not the safe harbour it once was. That’s pushing firms such as Blackstone to reduce their dependence on North America.

Alongside that push, there’s a pull factor thanks to changes in emerging markets. China’s new five-year plan places an emphasis on high-quality development for long-term growth. India’s tech sector continues to boom, building infrastructure the economy needs in a virtuous developmental cycle. And from East Asian data centres to South American mines, companies around the world are finding ways to tap into the flows of wealth around AI.

All of this creates opportunities for institutional investors. Cautious habits and outdated perspectives mean that many are still under-allocated to emerging markets, despite the opportunities that they represent. Blackstone’s latest fundraising event might be the first sign of this turning around.