Private equity investments are apparently flooding into emerging economies. Even though the lack of reliable market information and the constant threat of political upheaval makes this corner of the PE sector especially dicey.
The Emerging Markets Private Equity Association reports that private equity investment in emerging markets rocketed to $13 billion in the first half of 2010, versus $8 billion the previous year, according to an article in the Financial Times.
Geopolitical turmoil is not dampening the activity of firms such as Aureos, which is partially funded by the British government. The firm, with assets of roughly $1.2bn and 29 offices around the world, relies on a network of local professionals who can pierce through the lack of financial transparency in markets and get deals done.
For example, Aureos has invested in a 48 percent stake in Adalta, a Costa Rican cleaning products and insecticide company. Aureos also has a stake in wooden furniture maker Truong Thanh Furniture in Vietnam. Investments like these depend on the expertise of local lawyers and financial professionals.
The FT article points out that private equity investment in these so-called “frontier” markets requires a longer-term outlook. Investors are often unable to get their money out when the political situation turns sour. It also makes sense to invest in a pool of countries in a particular region, according to former Goldman Sachs banker Zain Latif who founded the frontier investment firm TLG Capital. TLG has investments in Ghana and Uganda, primarily in healthcare.
Is your firm eyeing emerging market opportunities? Would you ever consider taking a private equity job with an emerging markets private equity firm? Add your comments below.
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