Capital International raises largest emerging markets fund in 5 years

Capital International, Inc. has raised $3 billion for its sixth emerging markets private equity fund as its PE arm, Capital International Private Equity Funds, has made the final close of Capital International Private Equity Fund VI (CIPEF VI), exceeding the $2.5 billion target to meet the hard cap. Capital International is part of the Capital Group Companies, one of the world’s largest investment management firms with assets around $1 trillion.

According to Emerging Markets Private Equity Association (EMPEA), CIPEF VI is the largest global emerging markets private equity fund closed in the last five years. Other major emerging markets funds active in India include those by Actis Capital, Aureos Capital and Zephyr Management. While Aureos (now part of Abraaj Capital) and Zephyr typically raise country-specific funds, Actis is raising $3.5 billion for its fourth global fund, targeting Africa, Asia and Latin America.

Capital International has been investing in India for over a decade and exited companies like Captain Gopinath’s Deccan Aviation and IT services firm MindTree Ltd. According to VCCEdge, the financial research platform of VCCircle, it had made its first India investment in 2000 in Multi Screen Media (MSM), which runs Sony Television in India.

Since then, it has been investing off and in India, with the current portfolio including Manipal Universal Learning (2006) and L&T Finance Holdings (2011) besides MSM. The firm exited its investments in MindTree and Deccan Aviation (now Kingfisher Airlines) in 2009.

CIPEF VI was oversubscribed with commitments from more than 60 major institutional investors from Asia, Europe, the Middle East and North America, including 90 per cent re-commitment from existing CIPEF investors, the firm said in a statement. Key investors in CIPEF VI include Ohio Public Employees Retirement System, Oregon Public Employees Retirement Fund and Pennsylvania Public School Employees’ Retirement System. MVision Private Equity Advisers served as the exclusive global placement agent and strategic advisor while Debevoise & Plimpton LLP served as the legal counsel.

The current fund will look at 15-20 investments and will focus on approximately 16 out of the 138 emerging market countries. CIPEF VI has already committed nearly 20 per cent of the fund, which includes Rs 330 crore or $74 million in a pre-IPO round of funding of L&T Finance Holdings Ltd, the group’s financial services holding company. Another investment has been made into Eaton Towers, a pan-African telecom tower development and management company. Capital International’s private equity funds have invested in 78 portfolio companies, with 59 full or partial exits since 1992.

“As the first private equity program to focus exclusively on global emerging market private equity investment, without the rigidity of regional or country-specific quotas, we are able to take a truly holistic view of the emerging markets investment universe,” said Lam Nguyen-Phuong, CIPEF co-founder and senior managing partner. “We have no ‘must do’ countries or sectors, and believe this gives us a meaningful advantage when choosing which portfolio companies we want to partner with.”

Emerging markets are expected to generate almost 50 per cent of global purchasing power and nearly 66 per cent of expected global GDP growth as the emerging marketplace becomes more interdependent. Also, emerging market issuers has continued to drive the global IPO activity in the first quarter of 2012, according to Ernst & Young.

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