BY GORDON PLATT
Emerging market private equity funds raised a record $66.5 billion in 2008, and most plan to commit additional capital to new fund managers and additional countries in the next two years, according to the Emerging Markets Private Equity Association, whose members represent more than 50 countries.
“Investors recognize that emerging economies are the only ones still growing, and they also know that since private equity deals in emerging markets don’t rely on debt, the collapse of the global leveraged finance markets does not impede deal flow,” says Sarah Alexander, president of the Washington, DC-based association.
“The good news is that there is a pool of capital that can take advantage of unprecedented investment opportunities in emerging economies,” Alexander says. However, fundraising this year will be more challenging, she adds.
The association estimates that 371 private equity funds focused on emerging economies are looking to raise as much as $144 billion in capital. “The real challenge is convincing Western investors to maintain exposure to what are considered riskier markets,” Alexander says. The majority of investors think risk has increased, but they still plan to expand their exposure to emerging market private equity in the next five years, according to a recent survey by the association.