Emerging Markets Private Equity Arena Heating Up

March 1, 2007 (PLANSPONSOR.com) - The amount of private equity dollars being invested in the emerging markets of Asia, Eastern Europe, Latin America, the Middle East and Africa is apparently on the upswing.

A news release from the Washington, D.C.-based Emerging Markets Private Equity Association (EMPEA) said 162 private equity funds focused on investing in those regions raised $33.2 billion in capital commitments in 2006 – a 29% increase over the $25.8 billion raised the year before.

According to the announcement, the region drawing the richest pool of capital was emerging Asia, where 93 funds raised $19.4 billion – a 26% increase over the $15.5 billion raised in 2005. Funds dedicated to investments in China and India alone accounted for $6.8 billion, or 35% of emerging Asian fund totals, and nearly 20% of the overall total.

Meanwhile, Latin America, Sub-Saharan Africa, and the Middle East all experienced dramatic year-over-year growth in total funds raised, at 109%, 198%, and 54% respectively, according to EMPEA. Fundraising in Central and Eastern Europe and Russia continued steady growth as well, totaling $3.3 billion, a 21% increase over 2005.

“The strong fundraising record in 2006 demonstrates continued investor interest and confidence in this asset class – at least in part driven by improving returns,” said Sarah Alexander, EMPEA’s president, in the press release. “As emerging markets private equity becomes a more widely accepted allocation strategy among investors, we should continue to see growth, albeit at a more sustainable pace than the breakneck growth we saw in 2004 – 2005.”

Emerging markets private equity is not only growing in terms of funds raised, but also in terms of geographic and deal diversity, EMPEA said. Funds are also getting larger. Funds with final closes in 2006 averaged $270 million in size. Among the 105 funds with final closes in 2006 were 16 funds of $500 million or more, including four with final closes over $1 billion.

Among the 162 funds with closes in 2006 were 113 follow-on funds and 49 first-time funds.

However, as the group pointed out, emerging markets still represent only 9% of the estimated $400 billion raised by private equity fund managers worldwide in 2006.   Private equity investments in 2006 represented one-fifth of 1% of GDP in China, and one-half of 1% of India’s GDP.

EMPEA estimates that there are currently 262 funds in the market attempting to raise as much as $65 billion for emerging markets.

For further information go to  http://www.empea.net or call (202) 449-1155.