Emerging Markets Draw Record Private Equity Funding

Emerging markets took 9% of the global total of $240 billion invested by private capital funds during the first half of 2017, the highest since 2011.

Emerging markets have returned to favor with investors, with a pickup in spending by private equity-style funds during the first half of 2017.

According to new figures from the Emerging Markets Private Equity Association, some $22 billion was invested in the six months to end of June, nearly double that disbursed over the same period last year and the highest figure since records began in 2008.

Emerging markets took 9% of the global total of $240 billion invested by private capital funds during the period—the highest share since before emerging markets’ sudden fall from grace in 2011.

Christopher Elvin, head of private equity (PE) products at research house Preqin (which also published a report this summer on PE and related investments in emerging markets), agrees that “assets under management are continuing to expand,” but adds that “fundraising has not matched this, having peaked in 2014.”

Funds, which previously “kept their powder dry,” are now committing to buyouts and more venture capital-style investments, especially in globally favored sectors like IT, telecom, healthcare and renewable energy.

But amid this upsurge, there are winners and losers. There has been a return to large-scale buyouts, and here China continues to attract the lion’s share, with four out of the 10 biggest deals. “The wide range of family-owned organizations in Asia present plentiful opportunities for private equity funds,” notes Elvin.

Some $2.9 billion of capital investments went to Latin America, a 54% increase over the same period last year, while Central and Eastern Europe had its best half-year since records began, on the back of a $3.3 billion buyout of Allegro, the Polish e-commerce platform. But the Middle East, Africa and southeast Asia all saw sharp declines in PE investments.

A fifth of global investors surveyed by Preqin said they were looking to increase their emerging markets exposure overall. As Elvin notes: “Investors are having to go further to find opportunities.”