Emerging Markets Private Equity Remains Buoyant

Several factors point to further robust expansion for emerging markets private equity, even while recent credit concerns threaten the growth of PE activity within the U.S.

Emerging markets PE funds raised a total of $29 billion through August, or 85 percent of the record figure for all of 2006, according to the Emerging Markets Private Equity Association. The monthly pace for July-August accelerated to about $4 billion, from $3.5 billion in the first half of the year.

The biggest players continue to flex their muscles. Last week, Carlyle Group unveiled the first key hire for its new Southeast Asia investment team. Carlyle hired Anand Balasubrahmanyan away from Morgan Stanley, where he had been an executive director and head of Southeast Asia capital markets. He joins Carlyle Asia Partners as a Singapore-based director who will lead a team making investments in Southeast Asia, especially Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

Also last week, Morgan Stanley said it raised $1.5 billion for its third and largest Asia-Pacific private equity fund. According to Forbes magazine, U.S. investors contributed more than half the capital raised by the fund thus far, despite the widely publicized U.S. credit crunch. The largest group of investors is U.S. endowments and foundations, a Morgan Stanley spokesman told Forbes. Additional capital came from sovereign wealth funds and other types of institutions, a few high-net-worth individuals, and Morgan Stanley and its employees.

While funds focusing on Asia accounted for a little over half of all emerging markets PE fundraising through June, other regions are also showing strength. In Latin America, Advent International raised a record $1.3 billion for a fund that closed in July. Overall Latin America PE fundraising is poised to match levels not seen since the 1990s, according to EMPEA.

Two large pan-African PE funds closed in July, for $1.3 billion and $523 million.