We now have confirmation of what everyone has been living through: fundraising and investment levels in emerging markets fell by over 50% in the first half of 2009 compared to the same period in 2008, according to the latest figures put out by the Emerging Markets Private Equity Association (EMPEA). A total of 84 emerging market funds raised US$16 billion in the first six months of 2009, way down on the US$36 billion garnered in H1 2008. Investment figures tell the same story.
The figures will not come as a surprise to anyone, least of all those that are currently out in the market attempting to raise capital from the world’s capital-constrained limited partners. It is tough out there. “It is very difficult if you are out raising,” says Richard Laing, chief executive of CDC Group. “LPs across the world are facing problems from the denominator effect and so are overweight in private equity relative to other asset classes. They just cannot invest in new funds.” Add to that the lack of distributions from their private equity investments and you have a situation in which the cupboard, once full, is now almost totally bare.
This is especially true of the US endowments, which have traditionally been big supporters of emerging markets private equity. Many have scaled back their overall allocations to private equity and are effectively
shut for new business for the time being. The story is the same in the Middle East, where investors were increasingly looking to emerging markets as a home for their capital before the crisis hit hard. Sovereign wealth funds are scaling back their private equity commitments and many smaller banks and insurance companies are halting their investment programmes. The Emirates Insurance Company was recently quoted as saying that it was planning to reduce its commitments to private equity funds gradually because of the crisis and had no plans to invest new capital for the foreseeable future.
