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Private Equity

Interest in emerging markets private equity climbs, EMPEA survey finds

Private equity limited partners' interest in emerging markets improved slightly this year, according to EMPEA's 2018 Global Limited Partners Survey released Tuesday at a Washington conference.

The highest proportion of respondents since the 2014 survey, 88%, said they plan to maintain or increase the dollar value of their commitments to emerging markets private equity over the next two years. The 36% of those planning to increase allocations is up from 29% in 2017 and the highest since 2014, when it was 41%.

Larger institutions with more than $10 billion in global private equity allocations were most likely to decrease their allocations to emerging markets, while three-fourths of respondents with less than $100 million in that category plan to increase the value of the commitments, the survey found.

"The influx of interest from smaller investors is likely good news for newer fund managers, which are typically smaller in size," the survey noted.

The 14th annual survey by EMPEA, a global industry association for private capital in emerging markets, queried 107 limited partners in 36 countries with a collective $358 billion in global private equity assets. They included pension funds, development finance institutions, funds of funds, private market advisers, endowments, foundations, banks, insurers, asset managers, government agencies and sovereign wealth funds.

Asked why they plan to commit more, 58% of survey respondents said they are seeking greater diversification in their private equity portfolio, up from 38% of respondents in the 2014 survey.

In the 2015 survey, half said the planned increase was because they expected private equity to outperform other emerging market investment opportunities. This year, that figure was 32%.

Southeast Asia regained the top spot in EMPEA's market attractiveness rankings, followed by India and China. The survey noted that despite relative stability at the top of the rankings, Southeast Asia has failed to attract more capital than many markets ranked much lower, though limited partners are likely accessing the region through commitments to Pan-Asia funds.