Private equity investors expect higher returns from emerging markets investments over the next three to five years than global funds, according to a survey by Coller Capital and the Emerging Markets Private Equity Association.
While there's been no change in the percentage of institutional investors, 77%, that last year forecast a 16% net internal rate of return from their emerging markets private equity portfolio, more investors anticipate lower returns from their global portfolios compared with 2009, noted Jennifer Choi, director of research for the Emerging Markets Private Equity Association, a Washington-based trade group.
Twenty-nine percent of institutional investors now expect 16% IRR from their global private equity portfolios, down from 43% last year's survey.
The range of returns for global portfolios that got the largest response — 44.9% — was 11% to 15%. That compares with 17.1% who expect similar net returns from their emerging market portfolios in the next three to five years.
This is the second joint survey by the EMPEA and Coller Capital, a London-based private equity firm that invests on the secondary market. Global private equity information was taken from Coller Capital's quarterly investor survey, Coller Barometer.
Investors' top three emerging markets continue to be China, India and Brazil. Some 44% of investors expect to expand their private equity investments and 8% anticipate initial private equity investment in China in the coming year. Twenty-eight percent expect to expand investment in India and 12% indicate they will begin investing in India, while 18% expect to expand and 19% will begin investing in Brazil.
“The survey results are a confirmation of a trend we saw last year,” said Erwin Roex, partner with Coller Capital. “Investors in private equity have realized that growth in economies has generated returns in private equity.”