GLOBAL - Forty percent of pension funds with no exposure to emerging markets private equity (EM PE) are planning to invest in this class over the next one to five years, a survey by Coller Capital and the Emerging Markets Private Equity Association reveals.
EMPEA president Sarah Alexander said: "Investors recognize that emerging economies are the only ones still growing, and they also know that, since private equity deals in emerging markets don't rely on debt, the collapse of the global leveraged finance markets won't impede deal flow."
She added: "Emerging market private equity funds may benefit from very ripe conditions going forward: asset valuations are finally becoming more reasonable, and there is also a strong appetite for private equity capital because companies have fewer financing options."
However, the survey also found 65% of schemes will commit less to EM PE in 2009 than they did in the last 12 months, due to cash constraints or over-allocations to private equity.
In contrast, 73% of schemes indicated they viewed EM PE as too risky in the near term to invest in it over the next two years and 45% said they did not have sufficient staff or expertise.
Pension funds ranked Brazil as the most attractive destination for investments in the next 12 months, followed by India and China.
On the other hand, the majority of all investors surveyed ranked China as the most attractive destination.
Coller Capital partner Erwin Roex said: "Of the BRIC (Brazil, Russia, India and China) countries, China and India remain strongly attractive to private equity investors, but Brazil is the big winner in terms of changed appetite."
He said: "Some 17% of limited partners plan to increase their private equity exposure to the country over the next couple of years, and a further 11% expect to begin investing there. However, confidence in Russia as an investment destination has declined markedly."
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