Emerging markets grab larger share in global PE activity

Decline is less severe than in developed countries

 
Emerging Asia continued to lead and raised $ 11 billion in the first half of 2009, representing 69 per cent of total new commitments during the period, but a 61 per cent decline from the $ 29 billion raised relative to the previous year, the report by Emerging Markets Private Equity Association (EMPEA) said.

“Emerging markets continue to account for a larger share of the global private equity market, consistent with their contribution to global GDP and GDP growth,” Emerging Markets Private Equity Association President Sarah Alexander said.

Slowdown not severe

“The slowdown in emerging market fund raising and investment is consistent with and generally less severe, than the decline in developed private equity markets. We are not seeing the sort of capital flight from emerging markets that followed past crises,” she added. China and India also continued to be the most active markets for investment, with 88 and 68 deals, respectively, in the period ending June 2009, versus 103 and 89 deals, in the same period the previous year, the report stated.

Comparative figures

However, vehicles focused on India registered a 32 per cent decrease in capital raised year-over-year, while China- dedicated funds saw a 67 per cent decrease in capital raised at $ 3.9 billion down from $ 11.8 billion in the same period in 2008. Meanwhile, Emerging Markets Private Equity Association  estimates that the emerging markets share of global private equity fund raising has risen from 5 per cent in 2004 to 20 per cent as of June 2009 and from 7 per cent to 24 per cent of global private equity investment totals during the same period.

“Emerging Markets Private Equity Association expects fund raising for emerging markets private equity to remain challenging for the next 18 months. Even though many Western investors consider themselves under allocated to and remain bullish on emerging markets, their hands are tied for the near term due to internal cash constraints,” Alexander added. In contrast, Emerging Markets Private Equity Associationexpects the slowdown in investment activity to be comparatively transient.
“The slowdown in deal activity is in large part a reflection of the conservatism of emerging market fund managers who have been waiting for markets to stabilise and valuations to sink lower. There are already signs of a pick-up in deal activity in the second half of the year,” Alexander added.