The Sun is shining on the hammered private equity industry since the onset of the financial crisis, emerging markets are the warming rays.

Private equity funds investing in the developing world have not been immune to the crisis, with new fundraising slumping from US$66.5B (£43.8bn, €52bn) in Y 2008 to just US$22.6B in Y 2009, according to the Washington-based Emerging Markets Private Equity Association.

Investment by emerging market funds accounted for a record 26% of private equity activity last year, up from 14% in Y 2008 and just 7% in Y 2004.

Institutional investors intend to double the proportion of their private equity commitments to emerging markets to between 11 and 15% in the next 2 yrs, according to research published in April by the Emerging Markets Private Equity Association and Coller Capital.

This is a far better picture than that after the financial crises that happened around the turn of the century, which badly damaged the emerging market private equity industry.

“The first wave of investment was caught up in the Asian financial crisis, the devaluations in Latin America and the Russian rouble crisis. Performance was on average very poor, to put it mildly,” says Sarah Alexander, president of EMPEA, which represents 260 fund managers, limited partners and service providers.

The legacy of that period lingers in the performance figures. Over the past 10 yrs emerging market private equity and venture capital funds have returned a net 6.6% a year, lagging the returns from Western Europe and the USA, according to the most recent data from Cambridge Associates.

Yet during the past 5 yrs annual returns of 12.8% have outstripped those of the USA, and over the past 3 yrs, 8.1%, have also bested those of Western Europe.

Ms. Alexander believes this turn-a-round is not just luck, pointing to the fact that private equity groups are now more likely to have “boots on the ground” in the developing nations they invest in, rather than relying on “fly in, fly out deal making”, done a decade ago.—Paul A. Ebeling, Jnr. www.livetradingnews.com

Posted by Shayne Heffernan on Jul 25th, 2010and filed underAsia, Equities, Latest News, Markets.You can follow any responses to this entry through theRSS 2.0You can leave a response by filling following comment form or trackback to this entry from your site