LPs begin to favour pan-Asia funds

Fundraising by pan-emerging markets and Asia regional funds has overtaken that of country-focused India and China vehicles, according to data from EMPEA.

Emerging markets are attracting a larger share of private equity investment from LPs, according to the Emerging Markets Private Equity Association. EMPEA released data showing that 20 percent of capital commitments globally went to emerging markets-focused GPs during 2012 – the largest share to date, having risen from just 12 percent in 2007. 

A total of 161 emerging market funds raised $40.3 billion in 2012, up slightly from the 148 funds that raised $38.5 billion in 2011, offsetting a decreased interest in China and India.

Commitments to Asia have shifted away from China- or India-focused country funds to pan-Asian vehicles, as investors hope to diversify their portfolios and capture the growth of markets such as Southeast Asia. During 2012, China- and India-dedicated funds raised 35 percent and 24 percent less capital year-on-year respectively.

The overall capital invested in China deals during last year also fell, declining 33 percent year-on-year to $7.1 billion, a five-year low, with India-based deal value dropping 57 percent to $2.7 billion year-on-year, a seven-year low, according to EMPEA figures. 

“With macroeconomic turbulence in Europe and political uncertainty in the United States dominating the news in 2012, emerging markets proved to be a resilient and reliable engine of continued growth, thus driving increased interest in the emerging markets private equity asset class,” Jennifer Choi, acting chief executive of EMPEA, said in a statement.

She continued, “However, the pace of investment activity has slowed as businesses adjust to relative slowdowns in emerging market growth, as well as uncertain legal and regulatory regimes and challenging exit environments that continue to characterize a number of these markets.”