Coller EMPEA Survey: great expectations

The Survey also found great expectations of returns from the asset class category, with over 77% of LPs polled expecting it to deliver16%+ annual net returns over the next three to five years.

Over 57% of the poll said they had immediate plans to increase their commitments to emerging markets private equity. Furthermore, 59% said they expected 2010-vintage emerging markets funds to outperform developed-markets peers.

“Emerging markets will outperform mature markets,” affirmed Erwin Roex, Partner at Coller Capital, citing greater LP comfort with emerging markets GPs. “They’ve reassessed their risk/return equations,” he told AVCJ. “Governance in these markets has improved markedly. You now have GPs in these markets that have a decent track record.” Indeed, 61% of the poll rated their alignment with emerging markets GPs as at least as good as developed markets, and 23% actually rated it better.

China and India emerged predictably high on LPs’ interest lists, with China ranked as the number one most attractive investment region, followed by Brazil in second place, India in third, and the rest of emerging Asia in fourth place. And 67% of LPs polled said their chief motivation for increasing emerging markets commitments was exposure to economic growth.

“One of the reasons they’re so interested in investing in emerging markets is economic growth,” said Roex. “The other reason is, if you’re a large investor, one of your obvious options has fallen away; and that has been large buyouts.”

However, LPs’ expectations appear pitched very high where returns are concerned. 77% of the respondents expect 16%+ annual returns near-term, and 17% actually expect 25%+ net returns in the next three to five years; only 29% and 3% respectively expect similar returns from their global portfolios.

These high expectations were primarily based on calculations of returns from leverage-driven developed-markets private equity in the 2005-07 boom period, Roex conceded. “Recent returns in emerging markets have substantiated 15%+,” he conceded. But he acknowledged that “to say that you expect net of 25%; that might be rash.”

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• Topics
• Performance
• LPs
• Investments
• Greater China
• South Asia
• Coller Capital
• Erwin Roex