Preqin: Emerging Markets-Based PE Hits Record $297B in AUM

Jun 23 2016 | 5:42pm ET

Total assets held by private equity fund managers in emerging markets reached a record last year, according to a new report from alternative investment industry data provider Preqin, although PE’s proportion of total EM capital raised so far in 2016 has hit a record low. 

PE assets in emerging markets crested $297 billion as of September 2015, the report notes, up from $258 billion at the end of 2014. The growth in assets comes even as fundraising slows and foreign managers move into the market. 

The growth has been primarily based on an increase in the value of assets from which funds have yet to exit, according to Preqin. The level of uncalled capital available for investment peaked at $94 billion at the end of 2013 and has since fallen to $89 billion, while unrealized value has grown from $154 billion to $208 billion in the same period. 

The comes despite the growing interest shown in emerging markets by fund managers based outside of these regions. The proportion of aggregate emerging markets-focused capital which was raised by managers based in these regions peaked in 2011, when they accounted for 77% of the $69 billion raised. Since then, the proportion has fallen year-on-year, and in 2015 EM-based managers accounted for 49% of the $40 billion raised. 

In 2016 YTD, EM-based managers have accounted for just a third (33%) of the total capital raised for emerging markets, an all-time low. 

Other key elements of Preqin’s report:

  • Fundraising: 2011 saw the greatest number of EM-focused private equity funds reach a final close, at 335. Since then, the number of funds raised each year has fallen, and in 2015 just 199 funds reached a final close, raising a combined $40 billion – the lowest level of aggregate capital raised since 2009. 

  • Emerging Regions: Asia dominates the private equity landscape in emerging markets. The region accounted for 77% of EM-focused fundraising in 2015, and is home to 51% of EM-based managers and 50% of EM-based investors. 

  • Fund Types: Emerging markets-focused growth funds have raised $146 billion since 2008, the highest of any fund type, with buyout funds attracting $134 billion of investor capital. Despite only attracting $83 billion of investor commitments, 859 venture capital funds have reached a final close, by far the most of any fund type. 

  • Investor Preferences: Venture capital is the most sought-after strategy for EM-based investors, with 55% stating a preference for the fund type. Only 35% of investors in these regions prefer buyout funds, a lower proportion than for investors in North America or Europe. 

“Emerging markets have developed significantly over the past decade,” said Christopher Elvin, head of private equity for Preqin, in a statement. “As many more developed markets have seen slower growth in the wake of the financial crisis, some economies in emerging regions maintained double-digit growth rates. As such, private equity funds focused on these regions have been able to capitalize on opportunities.”

“Recent years have also seen increased participation in emerging markets from international GPs, which are attracted by the robust underlying demographics and potential for strong returns,” he added. “While managers based in these regions may struggle to compete with the resources of larger market entrants, they might be able to leverage their in-depth local understanding of these markets in order to attract investors.”

Founded in 2003, Preqin is a leading source of information for the alternative assets industry, providing data and analysis via online databases, publications and bespoke data requests. The company’s products are used by more than 40,000 professionals in 90 nations.

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