Emerging Market Private Equity Back to Pre-Crisis Levels

Fundraising and dealmaking by private equity firms focused on emerging markets appears to be returning to pre-crisis levels, according to data from the Emerging Markets Private Equity Association (EMPEA).

Getty Images

In the first half of 2011, 89 funds raised $22.6 billion, compared to $23.5 billion for the entire of 2010. Funds completed 431deals with a combined value of $14.1 billion over the same period, against 434 deals totaling $12.8 billion in 2010.

The recovery is driven by a combination of changing asset allocations at Western institutional investors, who are rethinking their attitudes to alternative asset classes and emerging markets, as well as by increased participation by emerging market institutions themselves.

“Institutions such as pension funds realize they have to increase their exposure to alternative investments to yield the returns needed to meet their escalating liabilities over the next 5-10 years," said Sarah Alexander, president and CEO of EMPEA in a statement.

"Given the drubbing to their equities and fixed income portfolios this summer, we anticipate even greater interest from institutional investors in private equity in emerging markets,” Alexander added.

In China, yuan-denominated funds raising capital from local investors comprised 56 percent of the total $10.5 billion gathered for investment into the country, according to EMPEA. In Brazil, $6 billion was raised for investment.

In Africa, the closing of Helios Investment Partners second Africa fund at $900 million in June took first half 2011 total fundraising to $1.1 billion. The trend on the continent is one of "commercialization", EMPEA said, as Africa funds gradually reduce the amount of money that they attract from development financial institutions (DFIs) and secure money from mainstream institutional investors.

Around 60 percent of all African PE-funds are DFI-funded, according to Ben White, the coordinator of the VC4Africa industry group.

China and India dominated the dealmaking space, with $5.8 billion and $3.8 billion, respectively, spent in the countries. In total, 54 countries saw deals take place, including some frontier locations, including Madagascar, Honduras, Laos and Uruguay, according to EMPEA.