Private equity investors intend to continue making new investment in emerging markets, despite the global economic crisis, seeing them as offering the only growth in a faltering world.
A survey by the Emerging Markets Private Equity Association (EMPEA) showed 78 per cent of institutional investors in emerging markets still intended to commit to additional deals over the next five years, with 49 per cent intending to do so within the next two years.
That compares to the 43 per cent who expected to make similar moves in the developed world private equity business over the next five years.
Developed world private equity has been savaged by the drying up of credit, as many private equity buyouts had previously been leverage- based but, in contrast, most emerging private equity deals will always be cash-based, and were even before the crash.
“Investors recognise that emerging economies are the only ones still growing, and they know that, since private equity deals in emerging markets don’t rely on debt, the collapse of the global leveraged finance markets won’t impede deal flow,’’ said EMPEA president Sarah Alexander.
The survey also showed that 62 per cent of those already invested in emerging markets would maintain or increase their commitments in 2009, although 38 per cent would cut back.
The survey showed 77 per cent of investors expecting annual returns of over 16 per cent from their emerging private equity funds over the next three to five years, compared to only 43 per cent expecting the same from their wider private equity portfolio.
They ranked China as the most appealing emerging markets private equity destination, followed by Brazil and India.
