India is most attractive emerging market for LPs

The country has steadily climbed to the top spot over the past three years, and is now considered the most attractive emerging market for GP investment in the next 12 months, according to a recent survey.

India is the most attractive emerging markets for investments in the next 12 months, according to the latest annual global limited partners survey conducted by the Emerging Market Private Equity Association.

“After steadily climbing in the survey's attractiveness ranking over the past three years, India has finally secured the top spot as the most attractive emerging market for GP investment in 2017,” EMPEA said in its new report.

South-East Asia, which claimed last year's top spot, followed in second place. Latin America excluding Brazil came in third place, overtaking sub-Saharan Africa.

Fundraising totals for India have reflected the current LP sentiment. GPs have raised $4.7 billion and $3.7 billion for India-focused private capital vehicles in 2015 and 2016, respectively, according to EMPEA. There were the higher annual totals since 2008.

Latin America excluding Brazil dropped to fourth position in 2016 after two years in the top position.

Movement was limited further down in the rankings, with China and Brazil both maintaining their 2016 positions as fifth and sixth, respectively, while the Middle East and Central and Eastern Europe swapped places at seventh and eighth, according to EMPEA.

Here are other findings from the survey:

LPs are opting for fewer new GP relationships in emerging markets. More than half of respondents, or 52 percent, expect to have fewer than five new emerging market fund manager relationships in the next three years.

LPs are seeking more flexibility in their means to access emerging market investment opportunities. More than two thirds of LPs surveyed want co-investments with emerging market funds and 52 percent of respondents plan to increase their exposure to co-investments in the next two years. Additionally, 43 percent seek investments.

Political and currency risk are some the highest concerns for LPs. Brazil and the rest of Latin America received the largest share of respondents deterred by currency risk, at 53 percent and 48 percent, respectively. Russia and Turkey received the highest percentage for political risk.

EMPEA surveyed 127 representatives from 106 different LP institutions in 34 countries in February and March.