Emerging markets PE leads global activity

Emerging markets private equity activity, buoyed by a 30 percent increase in capital invested last year compared to 2009, outpaced that of the rest of the world in 2010, the Emerging Markets Private Equity Association (EMPEA) year-end statistics have shown.

In all, 856 private equity and venture capital deals  worth $28.8 billion were completed in 2010 across the emerging markets, driven by a 27 percent increase in deal volume and a 12 percent increase in median deal sizes.

Asia continues to be the most popular destination for emerging markets investors, drawing 64 percent of the total resources allocated to the sector in 2010, the study said.

This is in part due to soaring optimism held by investors regarding the region, coupled with global investors’ changing perspectives on emerging market risk.

“We expect to see an increase in private equity fundraising across the emerging markets as investors not only seek exposure to high-growth markets, but also increasingly develop a more nuanced and informed perspective on emerging market risk relative to developed markets,” said Sarah Alexander, chief executive officer at EMPEA.

EMPEA noted that although emerging Asia saw a drop in funds raised from $15.9 billion to $14.2 billion between 2009 and 2010, the region still captured the majority of emerging markets fundraising with a 61 percent share.

 “While China and India will continue to anchor many investors’ portfolios, perhaps more than at any other time in recent history LPs are ready to entertain strategies that include markets previously seen as too risky or shallow,” Alexander said.

She identified Latin America as one of those markets.

Spearheaded by Brazil, the region featured prominently on the radars of those looking to expand their emerging markets exposure, with fundraising for Latin America and the Caribbean hitting a record $5.6 billion in 2010.

“I’m not surprised at the surging interest in Latin America, and particularly Brazil at this moment,” Alexander said, “While there was interest in 2006-08, Latin America was somewhat of an afterthought for many LPs and funds. Now, investors recognise the favourable political and economic fundamentals that will continue to drive opportunities in the long run.”

Capital invested in Latin America jumped 405 percent to $6.6 billion last year as international firms investing out of global funds began snapping up deals.