Assessing the Impact of Declining Oil Prices on EM PE – The LP View

Richard Rincon, Investment Officer, EM PE, UTIMCO

The recent decline in oil prices has had a mild positive effect on our overall portfolio primarily thanks to overall geographic and sector portfolio diversification. Over the medium- and long-term, we believe the majority of our portfolio will end up benefiting from low oil prices, particularly on the consumer front. With that said, within the global oil and gas sector, we believe that there are high-quality assets that can be acquired or financed at attractive valuations. We have disciplined partners with available capital that are in a prime position to capitalize on current market conditions. As such, even during this challenging pricing environment, UTIMCO remains committed to the broader energy sector.

Our view on emerging markets remains relatively unchanged as we are global, long-term investors, and we understand there will be commodity cycles during our investment periods. Before we underwrite any investment, we underwrite the country. Given the importance of commodities to emerging markets, we regularly run stress tests to better understand the impact of price declines on vital country-specific metrics such as government revenues and GDP output. However, aside from broad commodity exposure, at the end of the day we are looking for countries that can weather the cycles via economic diversification and fiscal and monetary policy effectiveness. In that light, we are seeing nice tailwinds in countries like India and Kenya, while closely monitoring the situations in countries like Colombia and Nigeria.

 

Read More  Views from the Field on Assessing the Impact of Declining Oil Prices on Emerging Markets Private Equity, including:

The LP View
Richard Rincon, Investment Officer, EM PE, UTIMCO

The Global View
Erik Bethel, Managing Director, Darby Private Equity

The View from Russia
Mike Calvey, Founder and Senior Partner, Baring Vostok Capital Partners

The View from Southeast Asia
Andrew Affleck, Managing Partner, Armstrong Asset Management

The View from Nigeria
Cyril Odu, Executive Partner and Head of Energy, African Capital Alliance

Two Views from MENA
Amjad Ahmad, Chief Executive Officer, NBK Capital Partners, and Nabil Triki, Co-Head of Private Equity, Swicorp