The Emerging Markets (EMs) Private Equity Survey is conducted by the Emerging Markets Private Equity Association on an annual basis. The survey researches the investment patterns, likes and dislikes of Limited Partners, representing North America (47%), Europe (41%) and Rest of the World (12%), for investment flows into the Emerging Markets.
The data shows that LPs believe that EMs will remain attractive over the medium term with China, Brazil and India ranked in order of priority as the most attractive destinations for private equity investments. The data is supported by the latest growth rate forecasts by the IMF for these economies averaging 4.5% for 2009 as against a growth forecast of 3.3% for all EMs. LPs are expected to increase their exposure to EMs during the next couple of years based on forecast growth and strong fundamentals.
The survey highlights that low levels of debt and robust underlying growth of EMs during recent years has increased investor return expectations from EM PE portfolios as against Global PE portfolios. The survey shows one-third of LPs without EM exposure to begin investment over the next two years. However, increased return expectations from existing portfolios, coupled with medium-term growth forecasts, for EMs has affected the perceived riskiness of EMs.
EMs will continue to remain attractive over the next 12 months as the global economy comes out of the financial crisis. The Middle East is part of the EMs and is expected to emerge as a strong contender for the limited pool of LP funds that will be invested in EMs. However, with only 1 PE deal over US$10 million for Q1'09 the market looks bleak with little hope of recovery till year end '09. However a bounce back in private equity activity is expected as early as Q1 '10.
Source: EMPEA Survey 2009