Study Sees More PE Activity in Emerging Markets
Half of LPs already in emerging markets will commit additional funds to their investments—and, possibly, others—over the next 24 months.
April 6, 2009
China, India and Brazil are emerging markets investment priorities for private equity firms now poised to capitalize on lower valuations, according to a survey conducted by the Emerging Markets Private Equity Association and Coller Capital.
“Emerging market private equity funds may benefit from very ripe conditions going forward: asset valuations are finally becoming more reasonable, and there is also a strong appetite for private equity capital because companies have fewer financing options,” said Sarah Alexander, president of EMPEA.
Of more than 150 interviewees, 78% of PE pros said they would commit more emerging markets opportunities over the next five years and 49% said they would ramp up investment in the next 24 months.
Because of PE cash flow, those best armed to do transactions do not have to rely on debt markets to complete deals, Alexander said.
Some emerging markets were not dubbed as hot as others; Russia, Central and Eastern Europe and Africa are believed to have an increase in risk recently, the study noted.
China, Brazil and India were ranked, in that order, as the most attractive destination for investments in the next 12 months.
“Of the BRIC countries, China and India remain strongly attractive to private equity investors,” said Erwin Roex, a partner at Coller Capital. “But Brazil is the big winner in terms of changed appetite. Some 17% of LPs plan to increase their private equity exposure to the country over the next couple of years, and a further 11% expect to begin investing there.”
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