We were at the IFC’s 21st Annual Global Private Equity Conference in Washington this week, swapping notes with executives from across the emerging market private equity ecosystem.
Here are some of the major themes:
1. Technology is driving investment gains
In her opening remarks, the IFC’s Maria Kozloski told delegates more than half the gains in its portfolio are driven by gains in technology. Sectors that have benefited the most include logistics, cold storage, consumer branding, healthcare and fintech. General Atlantic chief exec William Ford said tech innovation is accelerating penetration into emerging markets, some of which are now leading in tech development. But Raghuram Rajan, professor of finance, University of Chicago Booth School of Business warned that technology has also created a “missing middle”, unleashing global competition that has “eliminated jobs while rendering others more precarious”.
2. Rubenstein is bullish on EM
Carlyle co-founder David Rubenstein says it’s a good time to invest in emerging markets. Most EM headwinds, such as commodity price declines, concerns about corruption, accounting issues, finding good deals and financing challenges are over, he said. Carlyle is gearing up to raise its second Africa fund, according to sister title Buyouts. Rubenstein himself is also investing in EM through his family office, Declaration Capital.
3. Emerging markets don’t get credit for success stories
Emerging markets often aren’t recognized for their own homegrown successes. A case in point is artificial enterprise software company UiPath, which recently closed a $568 million Series D fundraising and is valued at $7 billion. UiPath began its journey as DeskOver in a tiny apartment in Bucharest in 2005 and received seed money from local firm EarlyBird Venture Capital. However, UiPath will not pop up as a Romanian success story, since it’s now listed in databases as a New York-based company, according to EarlyBird principal Cem Sertoglu.
4. GP-leds are on the menu
GP-led secondaries are developing in emerging markets, and a few landmark deals have affirmed the strategy should not be considered negative, said Morgan Stanley AIP executive director Pamela Fung. GP-led secondaries are a valuable strategy in markets where volatility can affect investing in and exiting deals during regular fund life, she added. Notable examples include Peruvian PE house Enfoca’s near $1 billion restructuring and Chinese firm Capital Today’s almost half-billion dollar single-asset restructuring, both last year.
5. Trade tensions are a mixed bag
Trade tariffs between the US and China have not significantly impacted Chinese private markets, but uncertainty has affected market confidence, with some IPOs being delayed or cancelled. Many firms are raising pan-Asia funds to mitigate potential fallout and portfolio companies have begun reducing dependence on the US.
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