Fund managers raised a combined $44 billion for emerging markets last year, a decline of 17 percent from 2014, while capital invested fell from $38 billion in 2014 to $29 billion in 2015, according to research from the Emerging Markets Private Equity Association (EMPEA).
Only 115 funds held a final close in 2015, the lowest number since EMPEA began tracking in 2006.
The emerging markets share of global fundraising declined from 14 percent in 2014 to 12 percent in 2015, while their share of global investment declined from 9 percent to 7 percent.
Meanwhile, fundraising increased in Western Europe by 8 percent, and declined by 3 percent and 46 percent in the United States and Developed Asia, comprised of Japan, Australia and New Zealand, respectively.
Private equity funds dedicated to emerging Asia raised a combined $25.88 billion last year, down from $28.9 billion in 2014. CEE and CIS-focused funds raised $355 million, down from $1.9 billion the previous year, while Latin America-focused vehicles collected $2.78 billion, down from $8.32 billion in 2014.
While private equity fundraising for sub-Saharan Africa dropped from $3.3 billion to $2.59 billion, 2015’s total was still the second highest annual fundraising total EMPEA has on record.
The largest emerging markets-focused funds to hold final closes in 2015 were RRJ Capital’s $4.5 billion RRJ Capital Master Fund III, Baring Asia Private Equity Fund VI, which closed on $3.98 billion, and PAG Asia II, which closed on $3.66 billion.
“The impact of current macroeconomic challenges proved to be highly differentiated from one market to another,” EMPEA said in a statement.
“Yet there were a few common themes that investors faced to varying degrees across emerging markets, including currency volatility, capital outflows and declines in commodity prices. Furthermore, slowing economic growth in China reverberated in one way or another across many markets.”
However, the research did reveal greater diversification across fund strategies.
While private equity managers raised $34.1 billion for 171 funds last year, down from $44.4 billion for 200 funds in 2014, infrastructure and real assets managers collected $5.18 billion for 21 funds, up from the $5.01 billion raised for 17 funds the year before. Private credit managers raised $5.18 billion across 23 funds in 2015, up from $3.95 billion across 22 funds in 2014. It was also a strong year for venture capital, with $7.3 billion raised, the second highest annual total in the last 10 years.
While the value of investments in emerging markets dropped last year, the number of transactions increased. GPs invested in 1,475 companies, an 8 percent increase on 2014 and the highest annual total since 2008 when EMPEA began reporting investment statistics. Consumer services attracted the most capital, with $9.8 billion deployed through 576 transactions, while financials, industrials and technology were also popular. The healthcare sector received $2.2 billion, its highest total on record.
The largest emerging markets investments recorded by EMPEA last year were MBK Partners’ buyout of Tesco’s interest in Korean retailer Homeplus Group, a deal valued at $6 billion, The Carlyle Group and IDG Capital Partners’ $1 billion investment in Chinese real estate portal SouFun Holdings, and Warburg Pincus and Legend Holding’s $550 million investment in mobile app-based chauffeured car service Ucar Group.
The research found that exit avenues were markedly different from region to region. In emerging Asia, 50 percent of exits recorded last year were via public markets and 24 percent were trade sales. Outside of that region, public markets accounted for just 22 percent of exits, while 46 percent of exits were to trade buyers.