According to a new survey by the Emerging Markets Private Equity Association and private equity secondaries firm Coller Capital, institutional investors are confident that emerging markets will continue to present attractive opportunities for the near future and many intend to maintain or expand their exposure over the coming years. Of those LPs that have already invested in emerging markets, over three quarters (78%) plan to commit to additional private equity managers and geographies over the next five years – nearly half of them (49%) plan on doing so within the next two years.
That being said, for the here and now of 2009, LPs are not quite so bullish (one must also remember that in a severe downturn, the sentiment of today can easily last well into tomorrow!). 38% of investors said they would shrink their commitments to emerging markets private equity, 37% would maintain their current levels, while only 25% have any plans to increase them. Also, fundraising and investment activity in emerging markets in Q1 of this year dropped by about half to $8-$10 billion and $5-$8 billion, respectively. For the 370 emerging market private equity groups attempting to raise as much as $144 billion, there’s always next year!
An interesting point that came up in the survey that bodes well for emerging market GPs is that just under half of investors (47%) in EM PE plan to refuse to reinvest with at least one of their GPs over the next 12 months. This compares with 66% of LPs planning to refuse to reup with a GP in the PE market as a whole.
The survey consisted of the responses from 156 financial institutions, including funds-of-funds, pension funds, endowments and family offices.