Editor's Letter: Rollercoaster ride

It’s hard to believe I’m already welcoming you to this, our October issue. And if it feels to you like the year is passing by in a frenzied whirl then you’re certainly not alone. A frenzied whirl would certainly be an appropriate way to describe the volatility afflicting Chinese public markets over the past few weeks, and the rollercoaster ride that many emerging market currencies have embarked upon this year.

It seems timely then, that the magazine contains an Emerging Markets special report, beginning on page 39, looking at how countries and regions as diverse as Russia, Latin America, CEE and Southeast Asia are dealing with often depreciating currencies, and, in many cases, capital flight to perceived safer havens.

Despite these well-documented travails, returns for both private equity and venture in Asia, Africa, Eastern Europe, the Middle East and Latin America actually outstripped those of developed markets (excluding the US) in 2014, according to data from Cambridge Associates.

While the pace of capital allocation to emerging markets has slowed in the short term, experience tells us that periods of public market dislocation are generally good for the patient capital of private equity. Certainly, Guy Hands (p. 47), among many others, remains bullish on Asia’s prospects in particular, while those with the stomach to handle the current economic volatility in markets such as Russia (p. 42) and Latin America (p. 50) might ultimately find themselves rewarded down the line.

There are also a number of opportunistic specialists hoping to pounce on cheap distressed assets in the energy sector after the dramatic fall in the price of oil. Our feature on page 48 looks at the relatively untapped Asian oil & gas sector. Meanwhile, our Deal Mechanic (p. 52) looks at Abraaj Group’s successful investment and exit from Peruvian womenswear retailer Iasacorp.

Our Privately Speaking feature (p. 26) keeps the focus on emerging markets, looking at how Hamilton Lane’s Hong Kong-based head of international Juan Delgado-Moreira is continuing to transition his business away from the firm’s traditional bread and butter advisory business into increasing numbers of higher margin separate mandate accounts, with the firm allocating an impressive $11.8 billion to private equity in 2014.

Delgado-Moreira makes a frank assessment of what the winners and losers in Asia’s private equity landscape will look like going forward. The group is also watching events in China closely, and hoping to pick up assets or companies in sectors such as healthcare logistics and energy, at considerably cheaper valuations than just a few weeks ago.

Of course, no one is taking China’s stock market volatility and sharply falling growth fears lightly. Our Asia roundtable from Hong Kong (p. 33) looks at how five local players are reacting to the latest news, and how they are managing their businesses to adapt to it. While it is too early to say whether the latest dislocation will have significant lasting impact or not, almost everyone is in agreement that the huge markets of China, and India, are markets that private equity investors ignore at their peril.

Enjoy the issue, 

Matthew Goodburn