The IFC is saying no to BRIC.
International Finance Corp., a member of the World Bank, is known for investing in debt in developing countries but for two decades, it also has been quietly investing in private equity funds that target emerging markets. But while institutional investor interest in the hot markets of Brazil, Russia, India and China began to boil in the past few months, IFC took a cool contrarian view and looked elsewhere in the developing world.
Emerging markets private equity has produced a 13.5% internal rate of return since the IFC took massive write-downs in March to mirror the decline of the worlds stock markets. That diversification beyond the BRIC countries helped produce IFCs double-digit return, a feat in a year when many private equity investors would be thrilled with a single-digit positive return.
Returns have been reasonably robust in the crisis, said David Wilton, CIO of Washington-based IFCs private equity private equity and investment funds department.
Thats even with a relatively conservative view of returns. Until the March write-downs, the portfolio produced a net annualized IRR of 21% since 2000, he said. Recognizing that private equity fund managers return data lag by a number of quarters, in March the IFC reduced their private equity return estimates to approximate the declines in the worldwide listed markets, he explained.
We conducted the exercise in March, and we will continue to do so until the managers catch up, Mr. Wilton said.