EMPEA’s Releases Year-End 2018 Private Capital Industry Statistics
Posted On: 05 Mar 2019
Download the full press release here.
Private Capital Activity in Emerging Markets Reaches New Heights in 2018
EMPEA’s year-end 2018 private capital Industry Statistics highlight the continued growth of the asset class in Emerging Asia, recovery in Latin America and Africa
Washington, DC, 6 March 2019: EMPEA’s year-end 2018 private capital Industry Statistics reveal unprecedented levels of global investor interest in Emerging Asia, as well as a recovery in capital raised for private capital opportunities in Latin America and Africa. This past year, private capital vehicles across all emerging markets raised USD90 billion and invested a disclosed USD70 billion, representing year-over-year increases of 39 percent and 27 percent, respectively.
Emerging Asia and China accounted for much of the growth in fundraising and investment activity recorded for 2018. Due to strong international investor interest in Chinese technology-enabled, consumer-oriented businesses, funds raised for the country reached USD35 billion, the highest level ever recorded by EMPEA. However, China was not alone in posting a year-over-year gain in fundraising. Encouraged by improving investor sentiment and better economic prospects, capital raised for Latin America and Africa increased by 92% and 22%, respectively.
Across the emerging markets, investment themes that continue to attract capital include:
- Early- and growth-stage investments in consumer-facing sectors: Investments in the consumer discretionary, consumer staples and health care sectors accounted for nearly half of the USD70 billion in disclosed capital invested in emerging markets in 2018. Venture capital (VC) transactions represent a growing portion of deal activity in these sectors and in emerging markets overall. Indeed, VC deal count and total capital invested increased across Emerging Asia, Latin America and Africa in 2018.
- Infrastructure: Capital deployed by general partners (GPs) in EM infrastructure reached USD8.8 billion in 2018, approximately the same total as in 2017, which was the highest annual total on record. Much of the activity was focused in power and transportation investments: Global Infrastructure Partners’ USD3.7 billion acquisition of Asian renewable energy platform Vena Energy was the largest disclosed infrastructure investment in emerging markets in 2018.
- Control investments: Overall, primary and secondary buyouts accounted for USD26 billion in capital invested in 2018, up from USD24 billion in 2017 and just USD7.8 billion as recently as 2015. In particular, deal count and capital invested via buyouts increased year over year in Emerging Asia.
- Private lending to support growth and restructuring: Private credit has attracted increased attention on the fundraising trail in recent years, with capital raised for EM credit strategies reaching a new peak in 2018 at USD9.4 billion. GPs have sought to capitalize on financing constraints in markets that recently experienced volatility or implemented new bankruptcy guidelines, such as Brazil and India. India-focused Edelweiss Alternative Asset Advisors raised over USD1.3 billion for the onshore and offshore tranches of its second stressed-assets fund, the largest India-focused private credit vehicle ever recorded by EMPEA.
According to Jeff Schlapinski, Senior Director, Research at EMPEA, “The breadth of private capital strategies being pursued by investors in emerging markets points to an evolving and maturing landscape. In the wake of protracted periods of economic volatility and political uncertainty in many markets, investors are exploring new ways to put capital to work across the capital structure and across asset types. Moreover, technological change is continuing to transform traditional industries and put new services and solutions within the reach of consumers and businesses in emerging markets. As a result, many investors have sought exposure to early-stage VC opportunities.”
Regional and country highlights from EMPEA’s year-end 2018 Industry Statistics include:
- Africa: Africa private capital fundraising in 2018 rose 22%, year over year, including USD1.6 billion for growth equity strategies. The largest fund raised for the region in 2018 was Emerging Capital Partners’ fourth pan-African vehicle, with USD640 million in capital commitments. While investor appetite for African private capital funds has begun to improve, deal activity in 2018 was still below the high-water marks of recent years, as divergent trends at the country level and an uneven economic recovery influenced the region. However, VC was an exception to this general trend. The number of VC deals completed on the continent has doubled from 17 to 34 over the past four years. Moreover, fundraising for venture capital in Africa reached USD252 million across seven vehicles, up from just two last year.
- Emerging Asia: As investors continue to seek out lucrative private capital opportunities in Emerging Asia, fund managers active in the region have been ready to meet demand, raising USD76 billion in 2018. China proved to be the most popular destination for institutional capital in the region, but ASEAN markets have also benefited from increasing deployment outside of the region’s anchor markets. Indeed, capital invested in Southeast Asia increased by 158%, year over year, with Hopu Investment Management and Hillhouse Capital Management contributing USD5 billion in equity to the USD12 billion acquisition of Singapore-based Global Logistic Properties in early 2018.
- China: Fundraising for China-focused private capital vehicles swelled to USD35 billion in 2018, despite reports of the country’s economic slowdown and ongoing trade tensions with the United States. VC accounted for 42% of China’s overall fundraising total, aided by the USD2.5 billion close of Yunfeng Capital Fund III and the USD1.2 billion close of Shunwei China Internet Fund IV. Investment in software grew to USD1.8 billion, an increase of 159% from 2017. Furthermore, the pharmaceuticals & biotechnology sector attracted the majority of capital invested across all health care segments in 2018, led by CITIC Capital’s USD447 million investment in Harbin Pharmaceuticals.
- India: Indian private capital fundraising increased by 23%, year over year, in 2018, reaching USD13 billion. This is the highest total recorded by EMPEA. As GPs took advantage of distressed asset availability and government infrastructure initiatives, the number and size of control transactions spiked in 2018. Most notably, Macquarie Infrastructure and Real Assets acquired National Highway Toll Roads for USD1.5 billion, the largest disclosed private capital investment in India on record.
- CEE and CIS: Fund managers deployed USD2 billion in Central and Eastern Europe (CEE) and Commonwealth of Independent States (CIS) in 2018, led by Advent International’s USD939 million equity injection in support of its buyout of Czech pharmaceuticals manufacturer Zentiva. Large pan-European buyout firms have become increasingly active in the region and also represent a source of secondary exits for CEE-focused firms. For the fourth consecutive year, fund managers failed to reach a close for a Russia-focused fund, despite a slight overall resurgence in CIS fundraising led by Horizon Capital’s USD200 million Ukraine- and Moldova-focused Emerging Europe Growth Fund III. Managers also reached closes for funds focused on Belarus and Kyrgyzstan—the latter being the first such fund recorded by EMPEA.
- Latin America: GPs in the region raised USD8.7 billion in 2018, the highest total since 2015, on the back of recovery in Brazil and investor interest in a broadening range of strategies in the region, including private credit and infrastructure. Fund managers deployed USD889 million via 162 VC deals in Latin America in 2018—a more than tenfold increase since 2010. Newly minted unicorns like Nubank and Rappi have drawn increased attention from established global venture investors, illustrating that Latin America’s startups are now competing with their developed market counterparts on the global stage.
- Brazil: LPs committed USD6 billion to Brazil-focused funds, representing a 267% year-over-year increase and the highest level recorded by EMPEA since 2011. A substantial portion of the 2018 fundraising total accrued to 11 different local currency vehicles, with BRL-denominated fundraising surging to the highest level since 2012. Other fund managers sought to capitalize on investor appetite for private credit fund strategies. GPs raised a record USD2.1 billion for distressed debt, direct lending, and special situations funds—more than quadruple the amount raised over the preceding 12 years combined.
- Middle East: The sectors targeted by private capital fund managers in the Middle East reflected the region’s ambitions to diversify and modernize its economy. The largest disclosed deal of the year was Gulf Capital’s USD267 million investment in Saudi fintech company Geidea—which also represents the largest disclosed non-energy investment recorded by EMPEA in the Middle East. Furthermore, investment in the region’s software and computer services sector climbed to USD127 million through eight deals, the largest of which was General Atlantic’s USD120 million commitment to UAE-based PropertyFinder. Furthermore, a seven-year high of nine disclosed exits in the Middle East could create positive momentum for managers hoping to raise capital in 2019.
Additional EMPEA Member Data Resources
In addition to the year-end 2018 Industry Statistics presentation (PDF), EMPEA members can access the full Excel workbook, including performance data from Cambridge Associates, using their logins.
EMPEA will also be releasing its members-only quarterly Data Insights later this month. These market snapshots contain high-level executive summaries; key data points; and underlying fund, investment, and exit listings for each major EM region, as well as Brazil, China and India. For more information about EMPEA’s content offerings, contact email@example.com.
EMPEA is the global industry association for private capital in emerging markets. An independent, non-profit organization, the association brings together 300+ firms—including institutional investors, fund managers, and industry advisors—who manage more than USD5 trillion in assets across 130 countries. EMPEA members share the organization’s belief that private capital can deliver attractive long-term investment returns and promote the sustainable growth of companies and economies. EMPEA supports its members globally through authoritative research and intelligence, conferences, networking, education, and advocacy. To find out more, please visit EMPEA.org.
 Unless otherwise indicated, figures include private equity and venture capital, private credit, and private infrastructure and real assets