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Emerging market distributions fall 36%

Distributions in both emerging markets and non-US developed markets were down year-over-year, while US distributions rose to record levels in 2012.

Emerging market private equity and venture capital distributions to limited partners fell 36 percent to $7.7 billion in 2012, the first annual decrease in emerging market distributions since 2009, according to new research from consultant Cambridge Associates.
In Europe and other developed markets outside the US, total distributions in 2012 dropped 8.7 percent to $43.5 billion.

The drop in distributions in emerging markets and non-US developed markets coincided with a record year for private equity distributions in the US, which reached $118 billion in 2012, the highest figure in the 27 years since the inception of Cambridge’s US Private Equity Index. The spike in US distributions was helped by “friendly credit markets” and “anticipated tax hikes in the New Year, which motivated owners to sell”, Cambridge senior consultant Keirsten Lawton told Private Equity International in a previous interview.

Cambridge was unavailable for comment at press time.

Emerging market capital calls in 2012 also were down year-over-year, falling roughly 10 percent to $15.5 billion, while non-US developed market capital calls dropped 5.6 percent to $35.7 billion.

In terms of performance, private equity and venture capital generated positive returns for the year in both emerging markets and non-US developed markets but came in below their public market counterparts. 

Emerging markets returned 10 percent for the year, compared to an 18.6 percent return from the corresponding Morgan Stanley index, while non-US developed markets returned 14 percent, compared to 17.3 percent from the Morgan Stanley developed markets index. 

The S&P 500 also outperformed the private market indices, returning 16 percent for the year.

Cambridge’s database of developed non-US and emerging markets private equity and venture capital funds is comprised of 717 funds formed from 1986 to 2010.