EMPEA: More than 50% of LPs to expand SE Asia footprint

The EMPEA Global Limited Partners Survey interviewed 106 LPs headquartered in 28 countries between December 2011 and February 2012. Of those, 75% plan on ramping up investments in emerging markets, while only 26% will do the same in developed markets.

In 2004, 61% of respondents had no allocation directed toward emerging markets; now 57% expect the region to account for at least 16% of their overall private equity allocation by 2014.

Brazil is likely to see the largest influx of new investors but 53% of LPs are planning to expand or begin investment in Southeast Asian markets such as Indonesia, Thailand, Vietnam and Malaysia. In addition, 54% plan on initiating or expanding their exposure to Latin America.

"While China and Brazil are still very attractive, LPs are recognizing the opportunities in other less-penetrated markets, such as Indonesia, Nigeria and Colombia," said Sarah Alexander, president and CEO of EMPEA. "Deployment constraints are preventing capital from flowing in fast enough to catch up with investor interest - in short, demand is outstripping supply."

Last year, emerging markets captured 15% of the total PE capital raised, up from only 4% in 2004. Nearly three quarters of respondents expect the 2011 vintage emerging market PE funds to deliver net returns of at least 16%. Only 26% anticipate the same from developed market funds. China and Southeast Asia funds are tipped to generate the highest net returns over the next 3-5 years.

"We are going to the emerging markets because they are growth markets. The development of the middle class is real, and it is a turning point for these markets," said Brian Lim, a partner at Pantheon Ventures. "Investors in these markets are feeling more positive from the bottoms-up fundamentals in their portfolios because the health of the underlying companies have picked up."

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• Topics
• Southeast Asia
• LPs