# **Emerging and Developing Economies (EMDE) PE Markets**

Data from the Emerging Markets Private Equity Association (EMPEA) show a general increase in emerging market and developing economies’ (EMDE) private equity activity from 2013 to 2014, a continuation of the strong growth trajectory the segment has seen in recent years. The five regions considered "emerging" by EMPEA - that is, Emerging Asia, Central and Eastern Europe and the Commonwealth of Independent States (CEE and CIS), Latin America, the Middle East and North Africa (MENA) and Sub-Saharan Africa - all recorded increases in fundraising totals in 2014. Total fundraising in these regions increased 16 percent from US$39 billion in 2013 to US$45 billion in 2014, meaning that EMDE grabbed a larger portion of the global whole as fundraising across the board fell between 2013 and 2014. Capital invested in EMDEs reached a record US$34 billion in 2014, up from US$27 billion in 2013, and the largest annual total since EMPEA began tracking investment data in 2008. This progress was achieved amid the ripple effects of the U.S. Federal Reserve winding down quantitative easing and associated currency adjustments in many countries; China's economic downturn; the crises in Ukraine and the Syrian Arab Republic; general elections in Brazil, India, South Africa, Indonesia and Turkey; and the continued decline of global oil prices.

Nevertheless, while resilience in the face of challenges propelled the EMDE private equity market forward in 2014, some burgeoning trends could pose a threat to future growth. The prevalence of large regional funds has become a hallmark of EMDE PE growth, and it has caused an increasing proportion of capital to be concentrated in the hands of fewer managers. For funds that closed in 2014, 11 had a final fund size of more than US$1 billion, collectively raising US$26 billion, or 56 percent of the total capital raised for all closed funds. This is the biggest share large funds have had in the EMDE segment since 2008. On the other hand, smaller funds had a more challenging time fundraising in 2014; only 32 funds reached a final close of less than US$100 million, the fewest since before 2008. According to EMPEA analysis, the proliferation of large regional funds suggests that limited partners may be increasingly willing to invest large sums with only the most established fund managers, which could in turn pose a threat to the market's long-term growth.

# **Sub-Saharan Africa/West Africa PE Markets**

The African continent has witnessed a surge in private equity activity in recent years, following from a global trend of investors looking for new growth markets with higher yields. Specifically, within SubSaharan Africa, there has been considerable growth in the PE industry. In Sub-Saharan Africa, both capital raised and capital invested increased over 2013 and 2014. Fundraising activity jumped from US$1.5 billion in 2013 to US$4.4 billion in 2014, while investment rose from US$1.9 billion to US$2 billion. In 2015, both Helios Investment Partners and the Abraaj Group<sup>10</sup> raised roughly US$1 billion each in Africa-focused funds. These trends are part of a larger investment wave hitting Africa, as investors are increasingly attracted to its middle class of over 300 million in a continent of US$1 billion, increased competitiveness in the private sector, economic diversification and the spread of stable governments. Moreover, investors are eager to take advantage of good investments with low capital input.<sup>11</sup> While concerns around exits remain, managers have found opportunities – 95 percent of African PE investments are exited through strategic acquisitions, and 5 percent through IPO.

> 10 Since the completion of this report, the Abraaj Group and its fund management business entered a court-supervised liquidation process in the Cayman Islands in June 2018.  The appointed liquidators and investors are in discussions about the future of the Abraaj funds, including the potential entry of replacement fund managers.

> 11 In 2012, the average PE investment in Africa was a little over US$14M (compared to over US$40M in China and US$26M in India).

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