Private equity fundraising across emerging market General Partners has reached the pre-September (2008) levels as 89 funds have raised $22.6 billion in the first half of this year, compared to $23.5 billion raised throughout 2010. The current trend puts the emerging markets on the track to potentially double 2010 fundraising totals.

This also marks the ‘most raised amount’ over a six-month interval by emerging market PE funds since the second half of 2008, when $29 billion was raised, according to the Emerging Markets Private Equity Association (EMPEA). Emerging markets private equity funds raised $33.2 billion in 2006 and $59.2 billion in 2007, before reaching a peak of $66.5 billion in 2008.

The majority of growth in new capital continues to be driven by a handful of markets, with funds dedicated to investments in China, India and Brazil collectively drawing 70 per cent of the capital raised between January and June, as against 50 per cent in all of 2010. China-dedicated funds raised $10.3 billion in the first half of 2011, putting China on pace to eclipse the $14.5 billion raised in 2008.

The increased pace of fundraising in markets like China and Latin America has been driven by greater participation from local investors like government agencies and pension funds.

“Western institutions are continuing to seek greater exposure to the world’s fastest growing markets, and institutions in the emerging markets are significantly ramping up their investments in the asset class,” said Sarah Alexander, president and CEO of EMPEA. “Fundraising activity in the first six months of 2011 reached almost full-year 2010 levels, and we estimate that fundraising for the full year may reach $40 billion or more, which will exceed the 2006 total.

“Institutions such as pension funds realise they have to increase their exposure to alternative investments to yield the returns needed to meet their escalating liabilities over the next 5-10 years. Given the drubbing to their equities and fixed income portfolios this summer, we anticipate even greater interest from institutional investors in private equity in emerging markets,” added Alexander.

The pace of private equity deal-making in emerging markets has been steady throughout June, with 431 deals valued at $14.1 billion, compared to 434 deals valued at $12.8 billion during the same six-month period a year ago and 856 investments totalling $28.8 billion in 2010.

China and India have captured 68 per cent of the total invested capital, with $5.8 billion going to China and $3.8 billion to India. They have also claimed 54 per cent of the transactions completed in June, 2011, with 136 completed in China and 142 in India.


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