The 2013Global Limited Partners Survey,released by the Emerging Markets Private Equity Association (EMPEA), indicates Sub Saharan Africa as the most attractive market for private equity investments. The study surveyed institutional investors to hear their attitudes toward private equity investing in emerging markets.
The study shows that global limited partner investors (LPs) continue to believe that private equity in emerging markets will outperform markets in industrialised countries. Nearly 60% of LPs expect the dollar value of their emerging market private equity commitments to increase over the next two years. Although Sub Saharan Africa is seen as the most attractive market for investments, the markets seen as most attractive destinations for dealmaking are Brazil, China and India. Return expectations for most emerging markets have dampened slightly year-on-year, but remain highest for Southeast Asia and Sub-Saharan Africa, where 68% and 60% of LPs anticipate net returns of 16% or more from funds focused on these regions, respectively.
That Sub Saharan Africa is seen as the most attractive market for investment is a significant jump up from its 5 place ranking in last year’s Survey. Followers up are Southeast Asia and Latin America excluding Brazil, making it the first time in the Survey’s nine-year history that none of the BRIC markets broke the top three most attractive markets for GP investment.
Perceptions on market attractiveness are likely to translate into actual commitments, EMPEA states. Nearly 54% of LPs plan to begin or expand commitments in Sub-Saharan Africa, 49% in Southeast Asia and 46% in Latin America excluding Brazil. Sub-Saharan Africa is poised to see the largest influx of new investors, followed by Turkey and Southeast Asia.
“We seem to be entering the next stage of growth [for emerging market portfolios] as track records begin to develop across Sub-Saharan Africa, Southeast Asia and parts of Latin America,” said Nadiya Satyamurthy, Senior Director at EMPEA and editor of the study. “A growing number of limited partners are now further along in executing their private equity strategies in emerging markets. While many were in the early stages of building their emerging market portfolios just a few years prior, aggressively increasing their allocations to the asset class and funneling commitments to the BRIC markets, signs that LPs are slowing the pace of their commitments and diversifying beyond the BRICs suggest a maturation of portfolios.”
In reference to the increased investor interest in Sub-Saharan Africa, Southeast Asia and Latin America excluding Brazil, one institutional investor participating in the Survey commented, “These markets are very attractive because of the growth and greater pool of managerial talent, the development of local capital markets, and the ability to build on lessons learned.”
The complete study is accessible here. Also see EMPEA’s interactive Emerging Markets Private Equity Data Dashboards, and the EMEA website for more emerging market private equity fundraising and investment statistics.