Preqin: Emerging Market Private Equity Assets Boom to Cross $500 Billion Mark

Emerging markets-focused private equity funds have seen their assets grow at an average annual rate of 21% over the past decade, from $93 billion in December 2006 to $564 billion in September 2016, according to the latest findings by research firm Preqin.

The results come as venture capital investment in Asia through Q2 2017 accounted for almost half the global total invested and outpaced North America.

Among emerging markets, the majority of activity is focused on Greater China. The region is home to 883 private equity fund managers and 224 investors in the asset class. Funds focused on Greater China have raised $441 billion since the start of 2008, compared to $45 billion for Latin America-focused funds, the second-highest total.

One-fifth of global investors reported that they intended to increase their allocation to private equity in emerging markets in 2017, while only 5% said they wanted to decrease their exposure.

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Despite the strong fundraising by funds in the region, the profits returned to investors have exceeded drawdowns for investment recently. Distributions to investors exceeded capital calls by $7 billion in 2015, and $13 billion in Q1-Q3 2016.

“Robust performance and recent net capital flows to investors have proved that emerging markets-focused vehicles can offer real returns on investment,” Christopher Elvin, head of private equity products at Preqin, said in a statement.

Tags: Asia, China, Preqin, Private Equity

The California Public Employees Retirement System (CalPERS) reported a preliminary 11.2% return for the 2016-2017 fiscal year, bringing assets to $323 billion.

CalPERS’s Public Equity program delivered the strongest returns, generating a 19.7% preliminary net gain. Private Equity’s preliminary net returns were 13.9%, followed by Real Estate with a 7.6% preliminary net return.

Based on the preliminary fiscal year returns, CalPERS’s overall funded status is estimated to have risen 3% from the previous fiscal year to 68%. This estimate is based on a 7% discount rate.

Fixed Income returned 0.3% and Inflation Assets dropped 2.7%, bringing the total fund performance to 8.8% over the past five years, 4.4% over the past 10 years, and 6.6% for the 20-year period.

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The pension is in the middle of its asset liability management process, which it conducts every four years,” Ted Eliopoulos, CalPERS CIO, told CIO. The fund will carefully weigh risks as it seeks returns to further increase its funded status moving forward. “We will be conducting quite elaborate choreography, looking at asset allocation, our liabilities and the risk tolerance of our board in conjunction with our expected rates of return with our other expected rates of returns for our various candidate portfolios,” Eliopoulos said.

As for the current portfolio’s long-term total funding status, Eliopoulos expects a 6% return over the next 10 years, according to the fund’s December 2016 review.

“Of course, we welcome this fiscal year’s strong returns, but we also remain about 68% funded and vulnerable to a downturn in stock markets, ” Marcie Frost, CalPERS CEO, said in a statement. “This will be our focus as we continue to move through the asset allocation process over the next six months.”

CalPERS’s final 2016-2017 fiscal year investment performance will be calculated based on audited figures. However, the final value of the fund is not only based on investment performance, but also influenced by employer and employee contributions, monthly retirement payments, and other factors.

The full chart for asset class performance can be viewed below.

Tags: CalPERS, Fiscal Year, Pension, Ted Eliopoulos