India, China enjoy 68% of total emerging market PE investment

NEW DELHI: The lion’s share of private equity funds targeted at emerging markets goes to faster growth countries like India and China, with the two Asian giants cornering 68 per cent of the total invested value, says a study by the Emerging Markets Private Equity Association.

According to the EMPEA, which manages a global proprietary database of private equity activity across emerging markets, “China and India together captured 68 per cent of the total invested, with US$ 5.8 billion going into China and US$ 3.8 billion into India.”

Calculated on this basis, private equity investments in emerging market economies totalled a little over US$ 14 billion in the first six months of this year.

Moreover, India and China account for 54 per cent of the total number of completed PE transactions in the January-June period this year. China accounted for 136 completed transactions, compared to 142 in the case of India.

Private equity funds targeting emerging markets raised a total of US$ 22.6 billion in the first half of this year and the amount is all set to reach US$ 40 billion by the end of the year, the EMPEA said.  In the first six months of this year, 89 funds raised US$ 22.6 billion, compared to US$ 23.5 billion raised in the whole of 2010, putting emerging markets on track to potentially double 2010 fund-raising totals.

“Fund-raising activity in the first six months of 2011 reached almost full-year 2010 levels and we estimate that fund-raising for the full year could reach US$ 40 billion or more, which would exceed the 2006 total,” EMPEA President and CEO Sarah Alexander said.  Funds dedicated to China, India and Brazil collectively accounted for 70 per cent of the capital raised between January and June 2011, compared to 50 per cent in the whole of 2010.

China-dedicated funds raised US$ 10.3 billion in the first half of 2011 and Brazil is the target of multiple billion-dollar-plus funds this year, including two funds that together closed on US$ 3 billion as of June.

“Western institutions are continuing to seek greater exposure to the world’s fastest growing markets and institutions in the emerging markets themselves are significantly ramping up their investment in the asset class,” Alexander said.

Although the PE activity was mainly concentrated in larger and more mature private equity markets, investments took place across 54 emerging countries in the first six months of 2011, including nascent markets such as Honduras, Laos, Madagascar, Mongolia and Uruguay, the study added.