NEW YORK Emerging market private equity funds in 2012 had their best year for raising capital since 2008, pulling in $40.3 billion, although the amount of money committed to investment dropped as less flowed into sector juggernauts China and India.
According to annual data from the Emerging Markets Private Equity Association, last year the number of funds raising capital increased to 161 from 148 while the overall dollar value increased by 4.7 percent from $38.5 billion in 2011.
"An increase in capital commitments flowing to pan-emerging markets and Asia-focused regional funds helped to offset reduced interest in China- and India-dedicated vehicles, which saw capital raised drop by 35 percent and 24 percent, respectively," EMPEA said in a report.
Even as the amount of capital raised edged higher, the amount committed to investment fell by 11.9 percent to $23.7 billion in disclosed value to emerging market companies through 819 deals. In 2011, the number of deals was 876 for $26.9 billion.
Capital invested in China fell to a five-year low of $7.1 billion, a decline of 33 percent, EMPEA said. Investment in India dropped 57 percent to $2.7 billion.
Counterbalancing the declines was the $4.4 billion investment by private equity funds into Brazil, marking a 78 percent year-on-year increase. Investment into non-BRIC (Brazil, Russia, India and China) countries rose 35 percent to $8.3 billion.
Private equity investing in emerging markets proved resilient to the macroeconomic turbulence in Europe and the political uncertainty in the United States, EMPEA's acting chief executive officer Jennifer Choi said.
"However, the pace of investment activity has slowed as businesses adjust to relative slowdowns in emerging market growth, as well as uncertain legal and regulatory regimes and challenging exit environments that continue to characterize a number of these markets," she said in EMPEA's statement.
EMPEA said that the steady increase in fund raising in 2012 "masked the increasing proportion of capital concentrated in the hands of a few fund managers."
EMPEA highlighted Capital International's Private Equity Fund VI, LP as the largest, pan-emerging markets fund, citing $3 billion in capital raised to date. According to a filing with the U.S. Securities and Exchange Commission dated July 10, 2012, the Cayman Islands-registered fund had raised $2.827 billion.
The ten largest private equity funds reaching their target size in 2012 represented 55 percent of the total capital raised by vehicles closed last year. In contrast, the top ten in 2011 represented 42 percent of total capital raised.
The concentration of money going to larger funds resulted in just 30 middle-market funds closing in 2012. That is the lowest number since EMPEA started tracking fundraising statistics in 2006. Middle-market funds typically raise between $100 million to $499 million.
Regionally, non-BRIC market funds raised $8.3 billion through 297 deals, the highest number to date. Deal volumes rose notably in Chile, Malaysia, Morocco and United Arab Emirates.
Southeast Asia raised the most capital since 2007 with 13 funds pulling in $1.4 billion.
(Reporting By Daniel Bases; Editing by Leslie Gevirtz)