Data & Intelligence

EM PE Review – Volume VIII, Issue 4

Viewpoint from EMPEA President and CEO SARAH ALEXANDER

Raising funds, particularly for mid-sized private equity funds, is more difficult than it has been in years. EMPEA’s Q3 statistics show a difficult environment for fundraising on a pan-emerging market basis. Through the first nine months of the year, 110 funds raised US$27.2 billion, compared to 210 funds that raised US$66.5 billion in all of 2008. As 2012 comes to a close, fundraising remains a key challenge confronting GPs.

In our lead article, EMPEA’s Nadiya Satyamurthy shines a spotlight on a troubling trend within our industry: the concentration of capital in larger funds creating a yawning gap in financing available for middle market fund managers. Over the last four years, the average size of funds achieving a final close has grown from US$192 million to US$419 million, while the 10 largest funds holding a close YTD account for 55% of all capital raised, compared to 37% in 2011 and 35% in 2010. This concentration of capital risks leaving investors—and promising companies—devoid of opportunities for growth.

One of the most prominent investors in middle market funds (and below) is International Finance Corporation, which has a private equity portfolio of over US$3 billion invested in roughly 180 funds across the emerging markets. In this issue, David Wilton, Chief Investment Officer for IFC’s Private Equity and Investment Funds Department, shares new research on the job creation outcomes within their private equity funds’ portfolio companies. In contrast to private equity’s recent reputation as a job destroyer, IFC’s underlying portfolio companies created more than 300,000 jobs. Notably, IFC also found a positive correlation between fund IRR and jobs created, fitting with EMPEA’s enduring belief that profit-seeking private equity investors can catalyze private sector development in emerging markets.

Funds of funds are positioned to play a key role as solution providers bridging the gap between middle market fund managers and LPs. Our Inside Perspectives features the views of Rebecca Xu, Co-Founder and Managing Director of Asia Alternatives Management, one of the leading Asian funds of funds. Rebecca lays out the changing private equity landscape in Asia following the global financial crisis, as well as key trends across the region.

Finally, in response to member needs, we are adjusting our delivery mechanism for EMPEA research. All of your favorite content—data, analysis, features and industry-leading interviews—will still be coming to you, but now in a monthly email format and on our website, instead of in this quarterly publication. While we say goodbye to the Emerging Markets Private Equity Review, we’re excited to bring you more frequent content in a more easily accessible format in the year ahead.

On behalf of the team at EMPEA, we wish you a healthy and prosperous new year.

EMPEA represents the leading global investors in EM. I look forward to working alongside to drive much-needed capital for financing entrepreneurs and businesses worldwide.

Renuka Ramnath | Founder, Managing Director & Chief Executive Officer, Multiples Alternate Asset Management Private Limited

EMPEA plays an important and energetic role across the markets it represents, driving outreach and research initiatives, and promoting the role of private capital.

Brian Lim | Partner and Head of Asia and Emerging Markets, Pantheon Ventures

The developed markets have no equivalent to the role EMPEA is playing as a convener and source of trusted information in the emerging markets.

David Rubenstein | Co-Founder and Co-Executive Chairman, The Carlyle Group

I’m honored to join fellow industry pioneers in the leadership of an unparalleled network, filled with first movers, shaping the future of industries and communities.

Dr. Andrew Kuper | Founder and CEO, LeapFrog Investments

EMPEA's market and industry intelligence opens doors to new sources of capital.  I look forward to the future success of EMPEA and its members.

Torbjorn Caesar | Senior Partner, Actis

While there are certainly challenges for the industry, the opportunities abound in our target markets and globally, making a global association like EMPEA more relevant than ever.

Drew Guff | Managing Director & Founding Partner, Siguler Guff & Company