Emerging market fundraising wanes

Even with LPs still committing to emerging market funds, fundraising for such vehicles is declining, with Asia totals flat, according to PEI’s Research & Analytics division.

Fundraising by emerging markets-focused private equity funds worldwide has substantially declined since 2011, with 59 funds raising $12.94 billion during the first nine months of 2013, according to a report by Private Equity International’s Research & Analytics division. 

The amount compares with the close to $30 billion raised during the whole of 2012 by emerging markets vehicles globally, and is a significant step down from the $61.1 billion raised during the whole of 2011, data showed. 

“LPs often claim that returns from emerging market funds have not been high enough to justify the extra risk taken. However, a number of LPs are still keen on making investments into emerging market funds,” the report said.

For example, in September, US pension plan New Jersey Division of Investment committed $300 million to a separate account with fund of funds Siguler Guff to invest in Africa, Central and Eastern Europe, Latin America and Russia. 

New Jersey officials believe that it is currently under-exposed to the growing opportunities that emerging markets present, having previously invested only into Asia, according to PEI’s Research & Analytics division. 

LPs often claim that returns from emerging market funds have not been high enough to justify the extra risk taken. However, a number of LPs are still keen on making investments into emerging market funds.

PEI Research & Analytics division

Allianz Capital Partners also said that it is looking for opportunities to invest into Africa and Latin America, and are also increasing their exposure to Asia. 

Asia continues to top investors’ lists when tapping emerging markets. Out of all funds targeting all markets globally, the second largest to hold a final close during 2013 was dedicated to Asia Pacific: Kohlberg Kravis Roberts $6 billion Asia Fund II.

The largest fund was CVC Capital Partners’ $14.15 billion pan-European vehicle, CVC European Equity Partners VI.  

However, fundraising for Asia Pacific has remained flat year-on-year, according to PEI data. Asian funds raised a total of $20 billion during the first nine months of 2013, equal to the amount raised during the first nine months of 2012. 

In contrast, all other regions globally saw a rise in the fundraising figures, except Latin America, which saw a decline in the amount raised. 

The global uptick means the industry is on track for its biggest year of fundraising since the financial crisis, according to PEI data – outstripping the $302 billion collected in 2012, PEI reported earlier. GPs globally raised $83.9 billion during the third quarter of 2013, bringing the total raised this year to $275.2 billion.