PE deals drop in emerging markets

Despite the decline, Asia remains the standout.

Private equity and venture capital firms invested $24 billion in emerging markets last year, an annual drop of 7 percent, according to a statement by the Emerging Markets Private Equity Association.

Capital invested into Brazil, Russia, China and India slowed, though increased for the third consecutive year, the report said. Capital is increasingly moving beyond the BRIC countries. Emerging markets (ex-BRIC) attracted $10.5 billion or 44 percent of the total – the largest amount in five years.

Separate data from Thomson Reuters showed that private equity investment in Asia last year was the lowest since 2005. 

However, among global emerging markets Asia remains the standout, representing about two-thirds of the total last year, EMPEA data showed. In addition, Southeast Asia investments were up 39 percent year-on-year to $2.2 billion, a six-year high. 

Emerging Asia also accounted for 78 percent of venture capital activity across emerging markets globally, highlighting a trend toward diversification away from growth capital deals. 

The region outperformed emerging markets globally in net returns to LPs across multiple time frames as of June 2013, according to separate data from Cambridge Associates.

Despite the slowdown, particularly in the BRIC countries, an earlier survey by EMPEA showed that 60 percent of LPs expect their commitments to emerging markets to increase over the next two years. 

“We expect that these markets will adapt, greatly diverse as they are, to the new economic realities of a moderate Chinese economic slow-down and US interest rates rising gradually over time,” said Robert van Zwieten, president and CEO of EMPEA, in the statement. 

“For the time being, with asset re-pricing underway and local currencies depreciating in many emerging markets, this is a favorable time for highly discerning fund managers to put capital to work in select sectors.”