Emerging Markets Private Equity Association2The majority of LPs (nearly 60%) expectthe dollar value of their new private equitycommitments to emerging markets toincrease over the next two years, with15% planning to significantly increasecommitments. However, a greaterpercentage of respondents expect tomaintain their current level of EM PEcommitments in comparison to last year’sSurvey (36% versus 17%), suggestingthat many institutional investors areapproaching their target level of exposure.This marks the reversal of a trend seensince 2009 toward increasing commitmentsby a growing number of LPs.Funds of funds and public pension funds were the institutions with the greatest representation among all institutionalinvestors planning to increase commitments. The top three reasons cited for increasing private equity commitments were:the desire to grow total private equity commitments inclusive of emerging markets; the search for greater exposure to high-growth economies; and, growing comfort with the skills and experience of EM PE-focused fund managers.For those few institutions that plan to decrease commitments, the majority noted that that they have either met theirportfolio goals or that they have less cash overall to deploy to new funds. Of those institutions that are unsure as towhether they will begin investing in the EM PE asset class, most cited limited staff resources to evaluate and identify EM PEopportunities as their greatest obstacle.EM PE Commitments Growing at a Slower Pace asLimited Partners Approach Their Allocation TargetsExhibit 1: LPs’ Anticipated Level of NewCommitments to EM PE Over the Next 2 Years*44+36+4+1+1536%44%15%n Significantly highern Slightly highern About the samen Slightly lowern Significantly lower*Excludes development finance institutions and EM-focused funds of funds.1%4%Exhibit 2: Anticipated Level of New Commitments to EM PE FundsOver the Next Two Years, 2009–2013*100%80%60%40%20%0%8%17%75%2012 Survey5%36%59%2013 Surveyn Increase n No change planned n Decrease2011 Survey33%66%2010 Survey11%31%58%2009 Survey41%34%24%*Excludes development finance institutions and EM-focused funds of funds.%ofRespondents“ Emerging marketsprovide betteropportunities forinvestment.” — Asset Manager
Emerging Markets Private Equity Association4Sub-Saharan Africa Leads a New Tier of EmergingMarkets, Displacing the BRICs as Most AttractiveThe typical private equity portfolio of a surveyed limited partner (excluding development finance institutions and emergingmarkets-focused funds of funds) is predominantly focused on North America (47% of committed capital), followed byWestern Europe (22%). Within emerging market private equity portfolios, Emerging Asia represents the bulk of committedcapital (49%), followed by Latin America (22%) and Central and Eastern Europe (13%).Looking forward, signs suggest thatLPs will not only increase their privateequity exposure to emerging marketsoverall but also gradually diversify acrossa broad array of regions and countriesbased on perceived attractiveness. Forthe first time in the Global LimitedPartners Survey’s nine-year history,none of the BRIC markets broke the topthree most attractive markets. Thesefindings may indicate a maturation ofEM PE portfolios as LPs who initially builttheir emerging markets exposure viainvestments in the BRICs now seek thenext wave of growth.Exhibit 5: Disclosed Distribution of Current Committed Capital47+22+13+18+A 49+22+13+9+5+2+A18%13%47%22%49%13%22%n North American Western Europen Asia-Pacificn Rest of Worldn Emerging Asian Latin American Central and Eastern Europen Sub-Saharan African Russia/CISn Middle East and North Africa9%5% 1%Exhibit 6: The Attractiveness of Emerging Markets for GPInvestment Over the Next 12 Months – LP Views*Classified as “Other Emerging Asia” in 2011, 2012.Overall Ranking2013 2012 2011Sub-Saharan Africa 1 5 7Southeast Asia* 2 4 2=Latin America (ex-Brazil) 3 1 4China 4 3 2=Turkey 5 7 6Brazil 6 2 1Central and Eastern Europe 7 10 8Russia/CIS 8 8 10India 9 6 5Middle East and North Africa 10 9 9Global Emerging Markets
Emerging Markets Private Equity Association6Non-BRIC Markets Poised to See the Greatest Increase inPE CommitmentsLimited partners plan to increase commitments over the next two years to a number of the non-BRIC markets ranked asmost attractive for GP investment. Nearly 54% of all LPs surveyed plan to begin or expand investment in Sub-SaharanAfrica, 49% in Southeast Asia and 46% in Latin America excluding Brazil.Sub-Saharan Africa is likely to see the greatest amount of new investor interest with 19% of LPs planning to begin invest-ing in the region over the next two years, followed by Turkey (14%) and Southeast Asia (12%). New interest in Brazilhas tapered off in comparison to 2012 and 2011, perhaps tied to exposure gained by investors during Brazil’s recentfundraising boom. India is poised to see the greatest decline in investment with 16% of LPs planning to decrease or stopinvesting in the market.LPs looking to enter or expandinto Sub-Saharan Africa, South-east Asia, and Latin Americaexcluding Brazil represent adiverse mix of institution types.% of Respondents20% 0%10% 10% 20% 30% 40% 50% 60%Sub-Saharan AfricaSoutheast AsiaLatin America (ex-Brazil)BrazilChinaTurkeyMiddle East and North AfricaIndiaCentral and Eastern EuropeRussia/CISUnited StatesWestern Europe4% 8%9%11%9% 8%16% 6%Exhibit 8: LPs’ Planned Changes to Their EM PE Investment Strategy Over the Next 2 Yearsn Decrease or stop investing n Begin investing n Expand investing9%14%4%11%10%2%9%2%12%2%19% 35%37%37%30%33%18%16%18%11%11%16%11%0% 20%10% 30% 40% 50% 60% 70% 80% 90% 100%Sub-Saharan AfricaSoutheast AsiaLatin America ex-Brazil12% 27%15% 13%20%15% 5%31%37%39%20%20% 12%10%11%10%Exhibit 9: LPs Planning to Begin or Expand Investment in SelectMarkets by Institution Type% of Respondentsn Banks/Insurance Cos.n Pension fundsn Endowments/Foundations/Family officesn Sovereign wealth fundsn Funds of fundsn DFIs/Multilaterals
Emerging Markets Private Equity Association8Funds Focused on Southeast Asia and Sub-SaharanAfrica Expected to Deliver the Highest Net ReturnsWhile return expectations for most emerging marketshave dropped slightly year-on-year, suggesting a moremeasured attitude toward the EM PE asset class, LPscontinue to have high hopes for 2012-vintage funds.Limited partners have the highest net return expectationsfor funds focused on Southeast Asia, with 68% anticipatingreturns of 16% of more. Slightly less than 60% of LPshave similar return expectations of Sub-Saharan Africa-focused funds. China continues to be viewed relativelyfavorably with 54% of LPs expecting returns of 16% ormore; however, this is a drop from the 76% of LPs whohad similar return expectations last year while ranking themarket as having the highest returns potential.Most LPs have adjusted their returnexpectations downward for nearlyall emerging market regions andcountries to which they have exposureyear-on-year. The one exception isSub-Saharan Africa where 64% ofinvestors with exposure anticipate netreturns of 16% or more versus 57%who indicated the same expectationslast year.Exhibit 11: Distribution of Net Return Expectations From 2012-Vintage Funds for Select Markets% of Respondents0% 40%20% 60% 80% 100%Southeast AsiaChinaCentral and Eastern EuropeSub-Saharan AfricaRussia/CISLatin AmericaMiddle East and North Africa42%32%27%27%21%27%25%26%22%11%32%22%25%11%21%38%35%22%32%35%27%11%8%28%20%26%13%37%n Less than 10% n 11–15% n 16–20% n Above 21%%ofRespondents100%80%60%40%20%0%ChinaLatinAmericaIndiaSub-SaharanAfricaMENARussia/CISCEE90%61%73%63% 63%57% 57% 57%50%64%38% 38%47%38%Exhibit 12: Net Return Expectations of 16% or More for SelectMarkets by Investors with Exposure, 2012 vs. 2013n 2012 Survey n 2013 Survey
Emerging Markets Private Equity Association10Institutional Investors Value a Variety of Fund VehiclesLimited partners favor country-dedicated funds for theBRICs plus Turkey. Regional funds are most likely to bepreferred by LPs seeking to enter a number of markets thatthey have indicated to be of interest—Sub-Saharan Africa,Southeast Asia and Latin America (excluding Brazil).Pan-emerging market funds and global funds wereconsistently of less interest to LPs across all emergingmarket regions.Exhibit 14: Preferred Fund Vehiclesfor Accessing Opportunities in SelectEmerging Markets**Indicates percentage of respondents answering for each region/market.Country-specific fundsFunds of fundsRegional fundsGlobal funds withsome EM exposurePan-EM funds44%55%8%11%7%Emerging AsiaCountry-specific fundsFunds of fundsRegional fundsGlobal funds withsome EM exposurePan-EM funds43%65%Latin America3%6%9%Country-specific fundsFunds of fundsRegional fundsGlobal funds withsome EM exposurePan-EM funds32%47%Central and Eastern Europe3%11%7%Country-specific fundsFunds of fundsRegional fundsGlobal funds withsome EM exposurePan-EM funds72%27%4%5%7%ChinaCountry-specific fundsFunds of fundsRegional fundsGlobal funds withsome EM exposurePan-EM funds65%27%Brazil1%5%6%Country-specific fundsFunds of fundsRegional fundsGlobal funds withsome EM exposurePan-EM funds57%22%Turkey3%6%6%Country-specific fundsFunds of fundsRegional fundsGlobal funds withsome EM exposurePan-EM funds65%18%5%5%8%IndiaCountry-specific fundsFunds of fundsRegional fundsGlobal funds withsome EM exposurePan-EM funds19%44%Middle East and North Africa7%7%8%Country-specific fundsFunds of fundsRegional fundsGlobal funds withsome EM exposurePan-EM funds26%56%Sub-Saharan Africa6%6%8%Country-specific fundsFunds of fundsRegional fundsGlobal funds withsome EM exposurePan-EM funds53%Russia3%6%10%10%
Emerging Markets Private Equity Association12Respondent Profile and Survey DefinitionsBetween February and April 2013, EMPEA surveyed 112 LPs from over 30 countries, representing a diverse mix of public andcorporate pension funds, insurance companies, sovereign wealth funds, banks, asset managers, endowments, foundations,family offices, development finance institutions, multilateral organizations and funds of funds. These institutional investorscollectively represent disclosed global private equity assets under management of nearly US$430 billion and undrawncommitments of over US$180 billion.Prior editions of the annual Global Limited Partners Survey are available at www.empea.org.Exhibit 19: Respondents by Headquarters Exhibit 20: Respondents by Type of Organization49+30+9+12 31+15+13+11+8+8+5+5+449%30%9%12%n North American Western Europen Asia-Pacificn Rest of Worldn Fund of fundsn DFIn Public pension fundn Endowment/Foundationn Family office/Private trustn SWF/Government-owned org.n Bank/Asset managern Corporate pension fundn Insurance company31%13%11%8%8%5%5%3%15%Survey Definitions“Emerging markets” (abbreviated to “EM”) encompassesthe private equity markets of all countries outside of theUnited States, Canada, Western Europe, Japan, Australiaand New Zealand. “Emerging Asia” encompasses all of Asiaexcluding funds whose primary investment focus is Japan,Australia and New Zealand.“Private equity” (abbreviated to “PE”) encompassesleveraged buyouts, growth capital, venture capital andmezzanine investments.“Emerging markets private equity” (abbreviated to “EMPE”) funds encompasses PE funds that principally targetinvestments in emerging markets.
RESEARCH & CONTENTEDUCATION&ADVOCACYMake Informed DecisionsInﬂuence&EngageonIssuesWhy JoinEMPEA?NETWORK &CONNECTIONSConnect & ExchangeIdeasFounded in 2004 by a handful of visionaries at the heart of theemerging markets private equity and venture capital industry,EMPEA is an independent, global membership association whosemission is to catalyze private equity and venture capital investmentin emerging markets.EMPEA’s 300+ member firms share the belief that private equitycan provide superior returns to investors, while creating significantvalue for companies, economies and communities in emergingmarkets. Our members include the leading institutional investorsand private equity and venture capital fund managers acrossdeveloping and developed markets.EMPEA leverages an unparalleled global industry network to deliverauthoritative intelligence, promote best practices, and provideunique networking opportunities. Whether it is an LP choosingan investment location and fund manager, or a GP seeking newsources of capital, EMPEA creates opportunities for members tosucceed in a highly competitive investment environment.A different type of private equityand venture capital association• Global Approach• Authoritative Research• World-Class Network• Industry VoiceFor more information about EMPEA, visit www.empea.orgor contact Kyoko Terada at email@example.com or+1.202.333.8171.Join EMPEA at ourupcoming conferences!Changing Landscape ofEM PE Fund FormationEMPEA ProfessionalDevelopment WebcastPresented withDebevoise & Plimpton LLP25 June 201310:00 Washington/15:00London/22:00 Hong KongEMPEA Fundraising MasterclassPresented with AZB & Partners,Berchwood Partners andDebevoise & Plimpton LLP10 June 2013Mumbai, The Four SeasonsPrivate Equity in EmergingMarketsHosted by EMPEA and FT Live15 October 2013London, Intercontinental ParkLanePrivate Equity in AfricaHosted by EMPEA and FT Live16 October 2013London, Intercontinental ParkLane Our300+ memberfirms represent nearly60 countriesand over US$1trillion in assets undermanagement.