Emerging Markets Private Equity: Navigating Trends and Opportunities

Emerging markets private equity is a rapidly growing industry, with investments in countries like China, India, and Brazil reaching unprecedented levels. According to a recent report, investments in emerging markets private equity have increased by 20% in the past year alone.

One key trend in emerging markets private equity is the growth of consumer-focused investments. This is driven by the increasing purchasing power of emerging market consumers, who are expected to spend over $30 trillion by 2025. As a result, private equity firms are investing heavily in consumer-facing companies.

Investors in emerging markets private equity are often attracted by the potential for high returns. The average internal rate of return (IRR) for emerging markets private equity investments is around 15%, compared to 10% for developed market investments. However, this comes with higher risks, such as currency fluctuations and regulatory uncertainty.

Emerging markets private equity offers a lot of potential for growth. The last decade has been underwhelming, but there are reasons to revisit the asset class.

The near-term macro-economic environment could turn in favor of emerging markets if expected rate cuts in the U.S. lead to a weaker dollar. This could create opportunities for investors.

Long-term forces like youthful demographics and rewiring supply chains are likely to favor certain emerging markets countries, such as India and Mexico. These countries are poised for significant growth.

Many advisor portfolios are underweight emerging markets, but the current environment offers a chance to target the most compelling opportunities. Consider more granular exposures within emerging markets to find the best investments.

Here are some emerging markets countries to consider:

These countries have the potential for significant growth due to their youthful demographics and rewiring supply chains.

The world of private capital is increasingly meeting in Asia, as seen at the SuperReturn Asia conference. This trend suggests growing interest in emerging markets private equity.

The private capital market is a significant player in Asia, with many investors and fund managers attending events like SuperReturn Asia. These events showcase the growing influence of private capital in the region.

Investors and fund managers are drawn to emerging markets private equity for its potential for high returns and diversification.

Emerging markets have disappointed over the past decade, as a strong dollar and low corporate earnings growth led to underwhelming returns.

Historically, emerging markets have performed better as the U.S. dollar has weakened, as illustrated in the chart below.

Expected interest rate cuts by the Federal Reserve could weaken the U.S. dollar, making overseas assets more attractive.

A weaker dollar would reduce the burden of dollar-denominated debt issued by emerging markets, a positive development for these markets.

Macro tailwinds such as likely Fed rate cuts, reshoring, and rising commodity prices suggest a reversal in EM fortunes in the near term.

These tailwinds could lead to a boost in emerging market returns, making them a more attractive investment option.

Rewiring supply chains has become a reality due to the COVID-19 pandemic and rising geopolitical tensions.

One consequence of this rewiring is the creation of new winners and losers, particularly within emerging markets that have higher exposure to manufacturing and materials.

Southeast Asia, specifically countries like Indonesia and Malaysia, is a region that could benefit from this shift. They've become more globally competitive due to their lower cost of labor and participation in trade deals like the Indo-Pacific Economic Framework (IPEF) and Regional Comprehensive Economic Partnership (RCEP).

Mexico has been a beneficiary of "near-shoring", where production moves closer to the final consumer. U.S. policies like the Inflation Reduction Act have also stimulated more North American production in key industries.

Mexico remains the United States' top total trade partner, accounting for over 16% of total trade.

Super Return Africa is the go-to event for private capital investors looking to tap into the continent's growth potential.

It's a platform where the world of private capital meets in Africa, bringing together investors, fund managers, and industry experts to share knowledge and opportunities.

The event is designed to provide a unique gateway to private capital investing in Africa, offering insights into the region's market trends and investment opportunities.

Attendees can expect to learn about the latest market developments and network with key players in the industry.

By attending Super Return Africa, investors can gain a deeper understanding of the African market and make informed investment decisions.

Return North America is a platform where today's connections shape tomorrow's investments. It's a space where relationships and collaborations are formed, and deals are made.

SuperReturn North America is a key event in this ecosystem, bringing together investors and fund managers to discuss the latest market trends and investment opportunities. This event is a hub for networking and knowledge-sharing.

By attending SuperReturn North America, investors can stay ahead of the curve and make informed decisions about their investments. They can also connect with like-minded professionals and build relationships that will benefit their careers.

The connections made at SuperReturn North America can lead to new business opportunities, partnerships, and deals. These connections are the foundation on which successful investments are built, and they can be the key to unlocking long-term growth and success.

Industry Events are a great way to connect with emerging markets private equity professionals. SuperReturn Asia is a premier event that brings the world of private capital together in Asia.

Delegates from 45+ countries attend SuperReturn Asia, making it the most international audience of emerging market-focused investors you'll find anywhere. The event provides a unique opportunity to network with fellow investors and learn about the latest trends in the industry.

SuperReturn North America is another important event that shapes tomorrow's investments. It's where today's connections are made, and tomorrow's deals are done.

At these events, you can meet investors, fund managers, and other industry professionals who are actively investing in emerging markets. A snapshot of companies that attended in 2024 includes Maihar, 57 Stars, Blue Earth Capital, ILX Fund, idiem Partners, Taxim Capital, and more.

SuperReturn Middle East is a gateway to private capital investing in the Middle East, offering a unique platform to connect with investors and learn about new investment opportunities.

The SuperReturn Emerging Markets conference is a great place to exchange views with investors covering a truly global perspective of emerging markets. This is according to European Investment Bank (EIB Global) who praised the event for its best networking opportunity and efficient organisation.

Expert-led discussions at the conference provide valuable insights for investors looking to diversify their portfolio and enhance their business strategy. These discussions are led by senior LPs and GPs from all over the world.

The event is a safe space for intimate discussions and amazing exchanges with prominent GPs and LPs in emerging markets. This is according to IFC's Principal Investment Officer who found the event to be a great experience.

SuperReturn Emerging Markets brings LPs and GPs closer, fosters new relationships, and shares expertise for success in emerging markets investing. Three Impact Capital Advisory praised the conference for being a wonderful experience that achieves this goal.

The conference explores top strategies for driving returns while battling bottlenecks across Africa, Asia, Latin America, Middle East, CEE & Turkey and beyond. This is a key focus area for investors looking to reap the rewards of emerging markets investing.