Is Emerging Markets Private Equity Dying?
Portico’s first research piece explores several existential challenges besetting the industry, and presents a humble call to action to shore up support for the industry.
Key findings include:
- Stage of the industry life-cycle: The volume of capital raised annually has been stagnant since 2011, while the number of growth equity funds achieving a close declined by 30% between 2010-15.
- Are new firms entering? Fewer first-time funds are achieving a final close, and they’re not getting help from development finance institutions (DFIs)—DFIs are committing to more funds IV+ than to Funds I, II, or III.
- Are stragglers leaving? There are more “zombie” funds than viable GPs—56% of the firms that raised a fund between 2005-09 have failed to raise a follow-on fund; a significant volume of GP restructurings and secondaries may be required to clear the market.
- Are there substitutes? Venture and credit funds are gaining traction, as are “impact investing” funds; and, in their quest to reduce fee drag, large LPs are bypassing funds for platforms.
- Legal and regulatory hurdles: Regulatory complexity is making it more difficult for fund managers to raise capital from developed market LPs.
- Where are we going? Read the study to learn more.