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A heady mix: bullish LPs and advancing technology in emerging markets

Reflecting on the last ten years of SuperReturn Emerging Markets is fascinating. It highlights how much emerging economies have been through, the markets that have moved in and out of favour, and the topics that have remained firmly on the agenda throughout the years. A number of new topics have also entered and left the frame, this year being no exception.

The old favourite we can’t shake off: LP sentiment

Things are looking up. If the results from EMPEA’s recent LP survey are anything to go by, emerging market private equity managers should be optimistic: LPs are looking to increase the dollar value of their commitments to emerging economies – the highest proportion since 2014. We at SuperReturn have also heard this first hand from several investors.

What else have we learnt from LPs in preparing for this year’s event? The age-old question of emerging market private equity performance and how it is justifying its place in an alternatives portfolio remains ever present. Diversification seems to be a significant driver. And, of course, the numbers are important. But more often LPs are questioning the benchmark rationale and asking if comparing the performance of emerging market and developed market private equity is not dissimilar to comparing apples with oranges.

In addition to allocations to emerging markets, the direction of capital deployment remains a key question. Asia still attracts the lion’s share of capital, but we have learnt that other regions are getting more air time today, notably South America and Central and Eastern Europe. Furthermore, with many investors expressing an increased appetite for impact focused funds, technology, venture capital, credit, and secondaries, it’s an extremely interesting time for emerging economies and less-vanilla strategies. Only time will tell if this interest manifests into actual commitments. In the meantime, I think it’s fair to say we can be cautiously optimistic.

The new kid on the block: technology disruption

The technology revolution is sweeping across the globe and emerging markets are certainly not immune. In fact, these markets arguably sit in the most interesting position bearing witness to the leapfrogging effect, and any savvy investor will be keeping abreast of the developing interplay of technology between emerging and traditional markets.

It’s not just private equity funds capitalising on this wave. The impact of Alibaba, Tencent and SoftBank and other large strategics on the tech ecosystem is also front of mind for many. Recent news of SoftBank’s Vision Fund, according to the Financial Times, making further headway towards its $100 billion target is not small fry. The role of strategics could have profound implications on the investment landscape and is something we plan to address this year.

Add increasing protectionism and authoritarianism around the world, an evolving private equity industry, and increased amount of capital available to accelerating disruption through technology, who knows where we will be in the next 5 years. SuperReturn Emerging Markets is ready to answer some of these questions. Come and join us!

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