Emerging markets private equity fundraising is on track to beat the total raised last year, according to the Emerging Markets Private Equity Association, which says the USD35.3bn in capita
Emerging markets private equity fundraising is on track to beat the total raised last year, according to the Emerging Markets Private Equity Association, which says the USD35.3bn in capital raised by 104 funds in the first six months of this year represent a 68 per cent increase from USD21.0bn over the same period of 2007.
The most notable growth was for funds investing in emerging Asia, Empea says, noting that the total value of emerging market private equity funds raised in the first half of 2008 exceeds the USD33bn raised throughout the whole of 2006.
‘What began as incipient interest in emerging markets private equity has developed into an acceptance of the asset class as part of mainstream allocation strategy,’ says Empea president Sarah Alexander. ‘Economic conditions in the US and Europe appear to be having less impact on fundraising for private equity in emerging markets than in mature markets.
Empea’s analysis of fundraising trends for the first six months of 2008 indicates that fundraising by US-focused private equity firms is down 3 per cent in the first half of 2008 compared with a year ago at USD133bn, although European fundraising rose 16 per cent to USD61bn. Average fund size increased by 72 per cent, from USD197m in the first half of 2007 to USD339m this year.
As in previous years, funds focused on emerging Asian countries (the Asian-Pacific region excluding Japan, Australia, and New Zealand) continue to lead in emerging markets fundraising with a total of USD26.3bn, more than double the USD11.6bn raised by such funds in the first six months of 2007. Pan-Asian regional funds accounted for USD11bn of the total, while fundraising for China-dedicated funds set a new record of USD11.2bn. Capital commitments for India-dedicated funds grew by 357 per cent to USD3bn.
The level of fundraising among funds focused on other emerging market regions has been less impressive. Private equity fundraising targeting Eastern Europe and the former Soviet Union declined from USD3.61bn in the first half of 2007 to USD2.54bn, funds aimed at the Middle East saw a drop from USD1.82bn to USD1.14bn, and those investing in Latin America and the Caribbean slipped from USD1.35bn to USD1.29bn. However, the capital raised by multi-region funds grew from USD2.13bn to USD2.74bn, and Africa saw fundraising more than double from USD592m to USD1.26bn.
Funds focused on growth and expansion capital increased their dominance in emerging markets private equity, accounting for nearly half of funds raised in the first half of this year, compared with 38 per cent of the total in the same period of 2007. Venture capital funds represented 26 per cent of the capital raised, and buyout funds 13 per cent.
‘Fundraising results for the first half of 2008 bode well for the industry but don’t tell the whole story,’ Alexander says. ‘Institutional investors weighing their future allocations will be looking closely to see how quickly and how well this growing pool of capital gets deployed. As fund sizes continue to grow, investors need to see that these markets present sufficient opportunities to absorb this capital.’
The Emerging Markets Private Equity Association is an independent industry association that promotes a greater understanding of and a more favourable climate for private equity investment in emerging markets. Its more than 230 members represent 40 countries and nearly USD500bn in assets under management.
