Sarah Alexander Executive Director of the Emerging Markets, Private Equity Association

1. Is China still an emerging market, or has it emerged?

China is still an emerging market by every micro indicator that have. The rates of poverty are still very high, the average per capita income is still low and, even though there have been pockets of extraordinary growth, China has not yet emerged from being a developing country.

2. Emerging market private equity performance improved last year. Why?

There have been several drivers for improved performance over the short-term. One is the reopening of the IPO markets in a number of countries. Whether it be in Hong Kong or Chinese companies IPOing on U.S. exchanges or offerings in Brazil and Mexico… that route to liquidity returned. Second, strategic buyers became much more comfortable buying private equity positions in the emerging markets.

3. What emerging market do you feel is currently most underserved by the private

equity community?

The region most underserved right now is Latin America. There is a legacy of poor performance from 1990s-vintage funds, so investors are wary about returning. But there have been a number of developments in terms of political stability and regulatory and legal reforms that I think will bring investors back. But the markets are not crowded in most of the region, including countries like Mexico and Brazil.

4. What is the EMPEA’s primary goal for 2006?

Our top priority is to demystify the emerging markets for the institutional investor community. That is, we want to get them interested in gaining new or additional exposure to the asset class, and to help them understand what the opportunities and challenges are. We also want to demonstrate, where appropriate, that there are solid emerging markets managers out there.

5. Speaking of institutional investors, what is the status of potential limited partners from within the emerging markets?

I think it’s critical that local capital be in the game, to demonstrate to global institutional investors that there is local skin in the game and that these are markets worth pursuing. And there is some. For example, Brazilian pension funds are investing in the Brazilian private equity market. In India, there are some banks [investing] and we’ve also seen some activity in South Africa.

In certain cases, however, there are local regulations-sometimes good and sometimes not-preventing such investment. We’re developing a program to educate the investment communities in these countries about investing locally, so as to expand the market opportunities.