2Q 2017 | bloombergbriefs.com Private Equity Emerging Markets Outlook How investors manage risk and opportunity in global growth markets Contents Bloomberg Reports Managing Editor Paul Smith 01 Middle East & Africa Editors 02 Emerging Markets by the Numbers Ainslie Chandler Siobhan Wagner 04 Credit Alison Ciaccio Dana Pardini 05 Q&A: Seymur Tari, Turkven Creative Director 06 Latam Outlook Robert Vargas 07 Guest Commentary: Actis Art Director Pekka Aalto 08 Q&A: Narina Mnatsakanian, Sarona Contributing Art Directors 09 Regional Perspectives Rose Constantino Ian Maready 10 India Lesia Kuziw Tatunchak Chris Yerkes 11 Q&A: Chris McDonough, New Jersey Division of Investment Marketing & Partnership Director 12 1Q Fundraising Review Courtney Martens [email protected] +1-212-617-2447 Advertising Lucy Rosen [email protected] +1-212-617-6759 Reprints & Permissions Lori Husted [email protected] +1-717-505-9701 x2204 To contact the editor responsible Ainslie Chandler [email protected] +1 212-617-3766 Produced by Bloomberg Briefs On the Bloomberg terminal at BRIEF<GO> Take your free trial of Bloomberg Brief newsletters today The newsletters pull together reporting, insight and analysis of over 45 senior editorial staff and dedicated economists to help you stay informed and ready for your daily business needs. To set up your free trial Visit bloombergbriefs.com or call us at +1-212-617-9030. Ask about our group subscription savings. © 2017 Bloomberg LP. All rights reserved. This newsletter and its contents may not be forwarded or redistributed without the prior consent of Bloomberg. Please contact our reprints group listed above for more information. MIDDLE EAST & AFRICA Investors Spy Opportunity in Africa But Remain Cautious By AINSLIE CHANDLER FUNDRAISING FOR MIDDLE East “Eight years ago, 10 years ago, it was telecommunications company, and and Africa-focused vehicles retreated difficult to get people to take a call on Nigeria-based Diamond Bank Plc. sharply in 2016, amid ongoing caution an Africa fund. Now we don’t find it dif- from investors. ficult at all to get a slot in people’s diary, Middle East A total of $2.5 billion was raised for for a conversation. Getting a check While fundraising for buyout vehicles Middle East and Africa-focused private written is still a challenge,” Boynton dedicated exclusively to the Middle East funds in 2016, while 16 new funds were said, in a March 1 interview. has been particularly slow, global funds launched during the year, according to One of the biggest investment opportu- have been circling deals in the area. data compiled by Bloomberg. nities in Africa is infrastructure, he said. Health care has proven to be a That’s below the $4 billion raised “The deficit estimated by the World popular niche among fund managers and 42 new funds launched in 2015, the Bank is $100 billion needs to be spent in the Middle East and Africa. The Bloomberg data show. annually in Africa over the next 10 Abraaj Group has been active in the The weaker fundraising environment years. Government and multilateral space, making investments in busi- comes as limited partners remain con- capacity to fund that is really no more nesses including Morocco-based health cerned about the stability and outlook than half,” Boynton said. “There’s a $50 platform Oncologie & Diagnostic for these regions amid a suite of issues billion private sector opportunity, or Du Maroc. like the conflict in Syria and economic requirement, really.” Dubai-based TVM Capital Healthcare unrest in South Africa. Old Mutual’s $5 billion alternatives Partners Ltd. in March said it plans to business manages private equity funds, raise $250 million to invest in hospi- Africa Outlook funds of funds and impact funds. tals, clinics and health care manufactur- Despite the drop in fundraising, there Boynton said his primary concern with ers in the Middle East, Turkey and India. are positive signs in Africa. Private investing in Africa is jurisdictional risk. It hopes to secure a 25 percent annual equity deal flow in that region rose to “We don’t have a list of countries return for the fund, founder and chair- $3.8 billion in 2016, from $2.5 billion and say ‘these are no-go areas.’ We actu- man Helmut Schuehsler told Bloomberg in 2015, as activity in the energy sector ally look at the opportunity set. If an at the time. spiked, according to the African Private opportunity arises, we assess the com- Equity and Venture Capital Association. mercial opportunity and we assess the The association said in a Feb. 28 jurisdictional risk,” he said. Fundraising for Middle East and statement that North Africa was likely Carlyle Group could eventually raise Africa-Focused Private Funds to continue to receive an increasing an Africa-focused megafund, given the amount of transaction activity in that scale of opportunity in the market, 55 Funds region as stability improves. according to Bill Conway, the firm’s Launched Limited partners are showing more co-founder and co-chief executive interest in Africa but it is still tough to get officer. “I think we’re early in Africa. I them to invest, according to Old Mutual don’t think there’s another major fund Alternative Investments Chief Executive that has an Africa business,” Conway Paul Boynton. said, on its February earnings call. “Someday [about] 25 percent of the $9.1b people on this planet will be in Africa, $7.9b and so we’re there, we’re early, and 15 Funds we’re working hard. We’ve done some Launched pretty interesting deals there and we do it because we think we can grow it $3.9b into a larger … multi-billion dollar fund $2.5b over time.” Carlyle Group in 2012 closed on $1.1b $698 million to invest in Sub-Saharan 2012 2016 Africa and has since invested in com- Source: Bloomberg; Note: Includes funds that held closes $2.5b during the period. Includes only funds focused exclusively Amount raised in 2016 for exclusively Middle panies including CMC Networks, a on these regions and strategies. East and Africa-focused private funds pan-Africa and Middle East-focused 1 Emerging Markets by the Numbers By AINSLIE CHANDLER Emerging markets have experienced a slump in private fundraising in recent years, as a wide variety of political and economic issues have kept some investors and fund managers at bay. Here are some key data points from 2016, according to data compiled by Bloomberg. Latin America/Caribbean Eastern Europe Middle East/Africa Asia $1.2b Total raised for Eastern Europe funds in 2016 32% Decline in Latin America and Caribbean fundraising from 2015 to 2016 $740m Total raised for HIG Brazil & Latin America Partners, which closed in April 2016 $3.2b Total raised for Latin America $32.2b and Caribbean funds in 2016 Total raised globally for emerging markets funds in 2016 2 233% Increase in Eastern European fundraising from 2015 to 2016 $24.9b Total raised for emerging Asia funds in 2016 $3.3b Size of Qianhai Fund of Funds, a fund of funds launched in January 2016 to invest in Chinese private equity $8b 47.9% Amount potentially being Decline in fundraising for emerg- targeted by emerging-markets ing Asia funds from 2015 to 2016 focused Abraaj Group for a global fund, according to a Bloomberg report from January. It would be the $920m firm’s biggest fund Amount raised for Sequoia Capital India V, which closed in February 2016 46% Decline in emerging markets fundraising from 2015 to 2016 Source: Bloomberg 3 CREDIT Investors Embracing Emerging Markets Private Credit By AINSLIE CHANDLER A DECLINE IN bank lending, combined America, Farallon said at the time. long lock-up vehicles, according to with forecasts of increasing numbers of It follows the firm’s restructuring of Gustavo Ferraro, the firm’s head of Latin non-performing loans (NPLs) and dis- Chinese developer Kaisa Group Holdings American markets. tress in some sectors, are pushing up Ltd. in 2016. Gramercy sees opportunities in dis- fundraising levels for emerging markets Gramercy Funds Management, an tressed debt because banks are becom- debt funds. emerging markets investment manager, ing less active in lending for anything In 2016, $8.8 billion was raised for in 2016 also closed on $1 billion for that does not have a “vanilla” structure, emerging markets debt funds, more its third emerging markets distressed Gramercy’s Bradshaw McKee said, in a than four times as much was raised for debt strategy. joint phone interview with Ferraro. the asset class in 2015, according to data That firm has about $6 billion in “Anything that has any complexity compiled by Bloomberg. various emerging markets debt strat- or uniqueness is becoming harder for “Private credit funds have actu- egies, including about $3 billion in lenders,” McKee said. ally exploded and there has been very Gramercy is currently focused on strong take up from some types of Latin America, particularly Brazil and LPs, yield-chasing LPs especially,” Vish Argentina, McKee said. Ramaswami, head of Asia-Pacific VC and In Argentina, the change of govern- PE Manager Research for Cambridge ment has been a plus for distressed inves- Associates, said in an interview. tors because its market-friendly reforms “Those funds are growing in to the energy and oil sectors have given number and in capital under manage- investors greater visibility to invest, ment in Asia and they are also picking according to McKee. In Brazil, recent up steam in the Middle East as well. political and economic volatility has They usually have some kind of a meant companies have needed to divest coupon, it may or may not be amortiz- assets and created the need for capital.