Tethys Investments

Private Equity in Emerging Markets Accounted for 12% of Global Capital Raised

Private equity fundraising focused on emerging markets has slowed over recent years, both in terms of the proportion of total fundraising it represents and the total number of funds raised and capital secured. Since 2011, when emerging markets focused fundraising reached its zenith – representing 51% of all private equity funds closed and 40% of capital raised globally – its share of both the total number and value have fallen steadily. In 2016, 187 emerging markets-focused funds held a final close, raising $45bn, representing just a fifth of all funds closed and 12% of capital raised – the lowest annual total in the period examined.

While 2017 so far has seen just 61 emerging markets-focused funds close, securing $16bn, this represents 21% of all private equity funds closed so far this year.

Emerging Asia has dominated the emerging markets-focused private equity landscape, representing 77% of aggregate capital raised by such funds since 2008. Fundraising figures for the remaining sub-regions include:

• Latin America: Second only to Emerging Asia in prominence, although the region represents just 8% of capital raised since 2008 and 4% in 2016.
• Africa: Capital raised reached record levels in 2015 ($4.6bn), before declining to $1.7bn in 2016.
• Central & Eastern Europe: Geopolitical situation dampened investor enthusiasm, with fundraising falling from $5.6bn in 2013 to $1.3bn in 2016.
• Middle East: Similar to Central & Eastern Europe, concerns surrounding stability have seen fundraising fall from $2.9bn raised in 2012 to just $0.2bn in 2016.

  

Among all private equity funds closed since 2008, emerging markets-focused funds have generally spent more time on the road: a fifth of developed markets focused vehicles reached a final close in less than six months, compared with 15% of emerging markets-focused funds. This is more pronounced for funds currently raising capital: 59% of developed markets focused funds in market have spent less than a year and a half seeking capital compared with 48% of emerging markets focused funds.

Russia hosted four out of the five largest VC deals in the Central and Eastern European region, while Poland is home to the largest PE deals.

There are 582 emerging markets-focused private equity funds in market as of May 2017, seeking an aggregate $206bn from institutional investors. As with funds closed historically, Emerging Asia is the predominant geographic focus for emerging markets funds in market, as sought by eight of the 10 largest funds. Central Asia is home to only 12 emerging markets funds raising funds in 2017.

As per Preqin’s survey, only 21% of investors view emerging markets as presenting best opportunities, while only 9% of investors consider CEE region as a favorable region for PE investments.

Source: Preqin's Special Report: Private Equity in Emerging Markets. July 2017.

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