2013 Global Limited Partners Survey

The findings of this Survey are based on data collected from 112 LPs from over 30 countries. Representing public and corporate pension funds, insurance companies, sovereign wealth funds, banks, asset managers, endowments, foundations, family offices, development finance institutions, multilateral organizations and funds of funds, these institutional investors collectively represent disclosed global private equity assets under management of nearly US$430 billion and undrawn commitments of over US$180 billion.

Key findings from the 2013 Global Limited Partners Survey include:

1 – EM PE Commitments Growing at a Slower Pace as Limited Partners Approach Their Allocation Targets While LPs remain committed to investing in the EM PE asset class, there appears to be a slowing pace of new commitments as LPs near their allocation targets. While the majority of LPs (nearly 60%) expect the dollar value of their EM PE commitments to increase over the next two years, most do not plan to change the overall percentage of their institutions’ current global private equity allocation directed at EM PE funds—suggesting that much of the anticipated increase in commitments will be in line with the broader growth of private equity portfolios.

2 – Sub-Saharan Africa Leads a New Tier of Emerging Markets, Displacing the BRICs as Most Attractive For the first time in the Survey’s nine-year history, none of the BRIC markets broke the top three most attractive markets for GP investment as viewed by LPs. Sub-Saharan Africa took the lead spot for the first time—jumping from 5th place in last year’s Survey, and followed by Southeast Asia and Latin America excluding Brazil.

3 – Non-BRIC Markets Poised to See the Greatest Increase in PE Commitments Nearly 54% of all LPs surveyed plan to begin or expand investment in Sub-Saharan Africa, 49% in Southeast Asia and 46% in Latin America excluding Brazil. Sub-Saharan Africa is likely to see the greatest amount of new investor interest with 19% of LPs planning to begin investing in the region over the next two years, followed by Turkey and Southeast Asia.

4 – LPs Remain Bullish on EM Outperformance vs. Developed Markets But Have Lowered Expectations Institutional investors anticipate that private equity in emerging markets will outperform developed markets, with 61% of LPs expecting net returns of 16% or more from their EM PE portfolios versus 27% who expect similar results from their developed market counterparts. However, investors appear to be slightly less bullish overall relative to last year’s Survey respondents.

5 – Funds Focused on Southeast Asia and Sub-Saharan Africa Expected to Deliver the Highest Net Returns Return expectations for most emerging markets have dropped slightly year-on-year, suggesting a more measured attitude toward the EM PE asset class. Limited partners have the highest net return expectations for funds focused on Southeast Asia, with 68% anticipating returns of 16% or more. Slightly less than 60% of LPs have similar return expectations of Sub-Saharan Africa-focused funds.

6 – Political Risk Remains Primary Deterrent to EM PE Investing But Less Pronounced Barriers Overall Political risk is a less pronounced barrier overall but remains the primary deterrent to greater private equity investment in emerging markets. The percentage of LPs citing this as a key concern for most markets has declined—60% of LPs believe political risk to be an inhibitor with regard to investing in Russia/CIS (versus 73% in the prior year); 50% in MENA (versus 63%); and 36% in Sub- Saharan Africa (versus 66%).