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Annual LP Survey (Emerging Markets Private Equity Association), Mar 2009
Annual LP Survey (Emerging Markets Private Equity Association), Mar 2009
2009
This 5th edition of the Survey captures the views of 156 private
equity investors from around the world. The findings are globally
Investor location
Contents
Key topics in this edition of the Survey include:
Abbreviations
Limited Partners (LPs) are investors in private equity funds
2 2009
2009 Survey highlights
LPs believe emerging markets will continue to present attractive
those holding back cite concerns about EM PE risk and claim they
market for private equity investment over the next year, after
2009 3
Investors are seeking LPs planning to increase their PE exposure by adding EM managers and/or
geographies over the next 5 years
Increase
Over three quarters of LPs (78%) currently invested in EM PE plan exposure between
2009-2010
to commit to additional EM managers and/or geographies over (49%)
the next 5 years, with half (49%) planning to do so over the next
Increase
exposure between
2 years. 2011-2013
(29%)
(Figure 1)
are expected to
outperform equivalent
More affected
by the downturn
(19%)
developed market vintages
Less affected by
Over half of LPs (57%) believe their 2006 and 2007 vintage EM PE the downturn
Equally (57%)
affected
funds will be less affected by the global downturn than developed (24%)
(Figure 2)
4 2009
LPs’ annual net returns expectations across their private equity
57%
LPs expect their EM PE commitments to perform well over
with just 43% of LPs expecting such returns in the PE market as 43%
a whole.
* Coller Capital’s Global PE Barometer. Data relates to returns from existing and
new PE commitments across the PE market as a whole.
** EMPEA/Coller Capital’s Survey. Data relates to returns from new commitments to
EM PE funds.
(Figure 3)
to investing Slightly
higher
(14%)
Only 26% of LPs who intend to reduce commitments are LPs’ reasons for expecting their new commitments to EM PE funds
in 2009 to be lower than their actual commitments in 2008
doing so to re-focus on developed markets; even fewer – 19% –
cited EM PE risk in the near term as the driving factor. Less cash to deploy 65%
Over-allocated to PE 37%
(Figure 5)
2009 5
Fewer EM GPs will be LPs that expect not to re-invest with some of their GPs
over the next 12 months
53%
re-invest with at least one of their GPs over the next 12 months.
This compares with 66% of LPs planning to refuse to re-up with 66%
47%
some of their GPs in the PE market as a whole.
* Coller Capital’s Global PE Barometer. Data reflects LPs’ intentions across the PE
market as a whole.
** EMPEA/Coller Capital’s Survey. Data pertains only to LPs’ intentions across EM PE.
(Figure 6)
an issue.
Factors likely to deter LPs from re-investing with some of their EM PE managers over the next 12 months
(Figure 7)
6 2009
One third of LPs without EM Investors not currently invested in EM PE – investment
plans for EM PE
Start investing
between
2009-2010
Of the LPs surveyed who do not have exposure to EM PE, over (35%)
Start investing
between
2011-2013
(9%)
(Figure 8)
LPs planning not to invest in EM PE over the next 2 years cite risk
Factors likely to deter LPs from beginning to invest in EM PE over the next 2 years
Over-allocated 15%
to PE NA
(Figure 9)
2009 7
LPs see EM PE as somewhat Change in overall risk of EM PE investment over the last
12 months – LP views
(22%)
Nearly three quarters of LPs (73%) think that the overall risk of
Increased
slightly
(Figure 10) (54%)
4 out of 5 LPs who perceive the risk to have increased in EM PE The investment plans of EM PE investors who think EM PE risk has
increased recently
nonetheless expect to add additional EM GP relationships and/
No plans to
or geographies to their portfolios over the next 5 years. increase exposure
(20%)
Increase
exposure
between
2009-2010
Increase (49%)
exposure
between
2011-2013
(31%)
(Figure 11)
LPs now require a higher LPs’ perception of risk premiums required for EM PE funds relative to
developed-market buyout funds – by EM country/region
6.4%
2008
6.9%
premium
-0.5%
developed market buyouts China 6.4% 6.3% 0.1%
LPs assess the risk premium required for EM PE investments South Africa 7.0% 6.4% 0.6%
of risk were Africa (excluding South Africa), Russia/CIS and Sub-Saharan Africa (ex South Africa)* 8.4% 6.7% 1.7%
Brazil was the only country/region perceived to require a lower (Figure 12)
8 2009
LPs believe emerging markets Attractiveness of emerging markets for GP investment over the
next 12 months
(Figure 13)
less so China
Brazil
1
2
1
4
0
India 3 2 -1
The biggest movers in the investment attractiveness rankings Central & Eastern Europe (inc Turkey) 4 3 -1
are Brazil, which shifts to second place from fourth in 2008; Latin Latin America (ex Brazil) 5 7 2
Russia/CIS 9 6 -3
Brazil just beat India into second place by having a slightly
* “Pan Africa” in 2008 Survey
2009 9
Brazil poised to gain the most
first-time investors
Brazil will see the largest net increase in new investors in the
LPs’ planned changes to their EM PE investment strategy over the next 1-2 years
China India Other Brazil Latin CEE Sub- South Middle Russia/ North
Emerging America (inc Saharan Africa East CIS Africa
Asia (ex Brazil) Turkey) Africa
(ex S. Africa)
Expand investment Begin investing Stay the same Decrease investing Stop investing No plans to invest
(Figure 15)
LPs’ planned changes to their EM PE investment strategy over the next 1-2 years – net increase/decrease
Russia/CIS
CEE (inc Turkey)
South Africa
North Africa
Middle East
Other Emerging Asia
Sub-Saharan Africa (ex S. Africa)
Latin America (ex Brazil)
China
India
Brazil
Respondents (%)
(Figure 16)
10 2009
EMPEA/Coller Capital Emerging Respondents by region
Rest of world
North
Respondent breakdown – 2009 America
(47%)
The Emerging Markets Private Equity Association (EMPEA) is an Corporate pension fund
(6%)
independent, global industry association that promotes greater Other pension fund
Fund-of-Funds
(31%) (4%)
understanding of, and a more favorable climate for, private
Public
equity and venture capital investing in emerging markets. pension fund
(14%)
The 260+ members of EMPEA represent over $500 billion in
Development Finance
Family office/ Institution (DFI)
assets under management and include GPs, LPs and other key private trust Endowment/ (7%)
(9%) foundation
industry stakeholders. (10%)
(Figure 18)
This marks the 5th edition of the annual Survey of LP interest Respondents’ current EM PE investment strategy – % of PE
assets allocated to EM PE
in the asset class. Previous years’ results are available at
EM as % of PE assets
www.empea.net. Bank/asset manager 17.2
Corporate pension fund 14.3
Corporation 0.5
Research methodology Development Finance Institution (DFI) 49.0
Endowment/foundation 14.1
Research for the Survey was undertaken in January-February Family office/private trust 21.3
Fund-of-Funds 12.5
2009 by IE Consulting, a division of Initiative Europe (Incisive
Government-owned organization 19.3
Media), which has been conducting private equity research for
Other pension fund 7.3
20 years. Insurance company 12.5
Public pension fund 15.6