Cautiously, LPs study Asia, Latin America, Africa

Alona Ponomareva, principal portfolio manager of the pensions and endowments department at the World Bank, said the $20 billion fund maintains an asset allocation of about 15 to 17 percent toward emerging market private equity. “We’re looking to find good managers in the emerging markets,” she said. “Once we find them, we commit to them.”

The retirement fund for employees at the World Bank has small exposure in Africa, an area of growing interest, Ponomareva said. “It’s going to be a fantastic market for many decades, but you have to be selective.”

While the fund has backed some GP teams that have spun out, the fund does not look at younger private equity funds, she said in a presentation Speaking to about 800 participants at the International Finance Corp’s 16th Annual Global Private Equity Conference (in association with the Emerging Markets Private Equity Association) in Washington, D.C.

Rashad Kaldany, executive vice president of emerging markets at the Caisse de dépôt et placement du Québec, said the $200 billion fund also manages about $15 billion in emerging markets, most in listed equities.

The Caisse was regarded as a pioneer in emerging markets in the 1990s, but then it pulled out of the asset class in 2002.  But it has since come back to sift for private equity investments. The Caisse will target Latin America and parts of Asia in the south and east of the region, with check sizes ranging around $100 million.

“We’re more conservative,” Kaldany said. “We’re starting over and will look at less risky regions, and we’ll be very selective when we go.”

Serge Lepine, the CEO of the Qatar Au Dhabi Investment Co, said the sovereign wealth fund may look to build 10 or 15 GP relationships in emerging markets. Prospective managers would have to be more established, with a proven skill set in value creation in developing companies and their ability to sell businesses, he said.

Overall, the performance in emerging markets overall has been mixed. Lepine didn’t mention any specific relationships now in the mix, but he said Qatar Au Dhabi Investment Co has made some moves into Asia.

Mike Koenig, managing director of advisory firm Hamilton Lane, said the firm has taken a “more patient, deliberate” approach to emerging markets to invest in best of breed funds.

Co-investing remains a dominant theme emerging market  private equity and private equity, he said.

“The desire for cost effectiveness is driving that,” Koenig said. “You see more co-investments offered than ever before because LPs are asking for it.”