Emerging market private capital activity on the rise: report

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Emerging markets on virtual screen Egor Kotenko © /123RF Stock PhotosPrivate capital allocations to emerging markets hit unprecedented levels in 2018, totalling US$90 billion raised in private capital vehicles during the year and $US70 billion in disclosed capital invested according to the Emerging Markets Private Equity Association’s latest data.

The capital raised represents a 39 per cent increase and the disclosed invested capital represents a 27 per cent increase, year-over-year.

“The breadth of private capital strategies being pursued by investors in emerging markets points to an evolving and maturing landscape,” said Jeff Schlapinski, senior director of research at EMPEA, in a press release. “In the wake of protracted periods of economic volatility and political uncertainty in many markets, investors are exploring new ways to put capital to work across the capital structure and across asset types.”

“Moreover, technological change is continuing to transform traditional industries and put new services and solutions within the reach of consumers and businesses in emerging markets,” he added. “As a result, many investors have sought exposure to early-stage [venture capital] opportunities.”

China accounted for a large portion of private capital raised, reaching US$35 billion, notably the highest level EMPEA has ever recorded for the country.

However, China was not alone in attracting investor attention, with improving investor sentiment and economic prospects in Latin America pushing private capital raised up 92 per cent, the EMPEA found. Africa also saw a double-digit increase at 22 per cent, although deal activity is below the highs the region has experienced in recent years.

Private capital fundraising also increased in India by 23 per cent in 2018, reaching US$13 billion, the highest EMPEA has ever recorded.

Consumer-facing sectors played a big role in attracting capital. Allocations to health care, consumer discretionary and consumer staples businesses in their early and growth stages made up close to half of the US$70 billion in disclosed invested capital during 2018, the data revealed.

 

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