Fund raising and investment activity in emerging markets plummeted 50% in the first half of 2009 but decreased at a slower pace than more developed markets.
According to the latest research from the Emerging Markets Private Equity Association (EMPEA), there was a decline in both new capital commitments and private equity investment activity in H1 2009. However, the emerging markets captured a larger share of global activity than ever before. The research also indicated that activity will increase in the latter half of 2009.
A total of 84 emerging market funds raised US$16bn in the first six months of 2009, down 55% from the US$36bn raised by 132 funds in the same period in 2008. Investment totals also declined by more than 50%, with US$12bn invested across 265 transactions in H1 2009 compared to US$26.6bn from 391 deals during the same period of 2008.
In more positive news, emerging markets share of global private equity fund raising has risen from 5% in 2004 to 20% as of June 2009, and from 7% to 24% of global PE investment totals during the same period. EMPEA expects the slowdown in investment activity to be comparatively transient.
President of EMPEA, Sarah Alexander, said: “We are not seeing the sort of capital flight from emerging markets that followed past crises. In fact, emerging markets continue to account for a larger share of the global private equity market, consistent with their contribution to global GDP and GDP growth.”
In geographic terms, Asia led the emerging markets asset class, with US$11bn raised in H1 2009, representing 69% of total new commitments but a 61% decline from US$29bn raised during the same period of 2008. China and India continued to be the most active markets for investment, with 88 and 68 transactions respectively – although both countries experienced a decline in deal activity.
From EMPEA’s findings, Alexander concluded: “EMPEA expects fund raising for emerging markets private equity to remain challenging for the next 18 months. Even though many Western investors consider themselves under-allocated to, and remain bullish on, emerging markets, their hands are tied for the near term due to internal cash constraints.”