Appetite for emerging markets by private equity investors has shown a “rapid” rate of increase in recent years.
Preqin, which researches private equity trends, said assets had more than doubled since 2010 and had grown six-fold over the past decade.
Total assets under management for emerging market-focused funds were $564 billion (€494 billion) at the end of September last year, the latest figures available.
Net capital flows totalled $13 billion in the first three quarters of 2016.
Some key facts contained in Preqin’s ‘Private Equity in Emerging Markets’ report are:
- Funds have seen their assets grow at an average annual rate of 21% over the past decade, from $93 billion in December 2006 to $564 billion in September 2016;
- The majority of activity is focused on Greater China. The region is home to 883 private equity fund managers and 224 investors in the asset class;
- Funds focused on Greater China have raised $441 billion since the start of 2008, compared to $45 billion for Latin America-focused funds, the second highest total;
A fifth of global investors reported that they intended to increase their allocation to private equity in emerging markets in 2017.
Although it was noted that emerging market private equity funds represented a declining proportion of global activity in recent years and that 5% of investors indicated they intended to decrease their exposure, Christopher Elvin, head of private products at Preqin, said the doubling of assets came despite the industry facing a different set of challenges to investors in developed markets.
Slowing growth and rising debt in China, political and economic upheaval in Brazil, Venezuela and Argentina, and instability in Eastern Europe and the Middle East all put pressure on private equity operators there, he said.
“However, if anything, this underlines the success of the asset class to have doubled in size over the past six years.
He added that, while fewer investors view emerging markets as presenting the best opportunities compared to Europe or North America, if emerging market funds maintain their performance, the “gap will narrow in coming quarters”.
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