Corporate Financing Analysis - EM PE On An Upwards Growth Trajectory - 24 JULY 2017

In line with BMI's core view that an emerging markets (EM) recovery in growth will drive the global economy forwards over the next few years, we are seeing private equity (PE) investors putting increasing amounts of faith in EM-focused funds. In this vein, total assets under management (AuM) of EM funds broke through the USD500bn mark for the first time on record last year - according to the latest data from research house Preqin. Indeed, as of the close of September 2016, fund assets hit a level of USD563bn, highlighting three trends: firstly, a more than six-fold increase over the course of the last decade - an average annual growth rate of 21%, rising from as little as USD93mn in December 2006; secondly, more than double the level of AuM has been recorded as of the close of 2010, when assets tallied USD254bn; and thirdly the prevalence of a jump from USD502bn recorded six months previously at the end of December 2015 - a USD61bn increase. Looking ahead, we believe that if EM-focused PE funds continue to record such growth levels then they will slowly close the gap with the level of funding which goes towards developed-market focused funds which have longed dominated the asset class.

Putting Money Back Into Investors ' Pockets

This does not mean, however, that EM-focused fund managers are just building up the dry powder on their balance sheets. In fact, since the start of 2015, PE investors in EM have been receiving more money back than they have been putting in - a factor which we believe serves as a leading indicator that current fundraising levels will continue to rise over the coming quarters. Indeed, distributions to investors exceeded capital calls by as much as USD7bn across the 2015 full-year period - a return which has risen further still to USD13bn across the first nine months of last year, as shown by Preqin data.

The Only Way Is Up
EM-Fcocused PE AuM By Dry Powder & Unrealised Value, USDbn
Source: Peqin

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