Washington, D.C., May 16, 2006—In
recent years, the International Finance Corporation—the private sector
arm of the World Bank Group—has worked to make emerging-market private
equity more visible to investors. Initiatives have included working with
leading industry professionals to establish the Emerging Markets Private
Equity Association (EMPEA) and hosting an annual Global Private Equity
Conference. This year’s conference was co-hosted with EMPEA. With a capacity
crowd of over 600 delegates from over 60 countries, this conference is
now the premier event for investors in the sector.
Haydee Celaya, IFC director for private equity and investment funds,
equity is becoming an increasingly important sector globally, particularly
in the United States and Europe, but also in the emerging markets. Private
equity professionals are breaking down the borders of investing, recognizing
that globalization is transforming the private equity business.” She added
that the IFC-EMPEA conference is the largest and most comprehensive gathering
of practitioners active in emerging markets private equity.
Sarah Alexander, executive director of EMPEA, noted, “2005
was a remarkable year for the asset class with fundraising for emerging
markets private equity topping $21 billion (nearly quadrupling the amount
raised in 2004). Fundraising for the asset class in 2006 is expected to
match or exceed the 2005 record numbers.”
“Frontier Markets: Where Is the Smart Money Going and Why” was a major
theme at the IFC- EMPEA conference, May 11-12, in Washington, D.C. Participants
included managers of emerging-market funds, institutional investors, international
development institutions, bankers, academics, and others who are active
in the global private equity industry in the emerging markets. Participants
discussed key trends and issues relevant to the industry.
David M. Rubenstein, founding partner and managing director of the Carlyle
Group gave the opening address. Other speakers included Michael Klein,
vice president and chief economist, IFC; and James Zukin, senior managing
director, Houlihan Lokey Howard & Zukin. Sessions covered
hedge funds in the private equity sphere; hot button topics in term sheet
negotiations; alternative energy, clean technology, and carbon credits;
and private equity as an asset class in the emerging markets. In addition,
some discussions focused on specific regions.
IFC, celebrating its 50th anniversary, coined the term "emerging markets"
in the early 1980s. Portfolio equity investment into the emerging markets
grew by more than $19 billion last year and is setting a record pace for
the first half of 2006.
Antoine van Agtmael, Founder and President of Emerging Markets Management,
LLC and former IFC deputy director, said, “When I originally coined
the name ‘emerging markets,’ there was no foreign portfolio investment
in emerging markets. In fact, the name was designed to give a more uplifting
feeling to what we had originally called the Third World Fund. So the name
was born and so also was born the IFC emerging markets database and the
IFC's role typically includes:
- Acting as a catalyst for mobilizing
- Supporting experienced fund managers
who can implement value-added strategies
- Working with fund managers on corporate
governance and sustainability at the fund and company levels
- Enhancing the transparency and accessibility
of emerging-market funds to commercial investors
From its founding in 1956 through FY05, IFC has committed more than $49
billion of its own funds and arranged $24 billion in syndications for 3,319
companies in 140 developing countries. IFC’s worldwide committed portfolio
as of FY05 was $19.3 billion for its own account and $5.3 billion held
for participants in loan syndications.
Today IFC is the largest multilateral provider of financing – loans, equity,
risk management, and structured finance products – in the developing world.
IFC is an innovative laboratory for new, market-oriented solutions
for reducing poverty and addressing environmental and social challenges.
IFC, the first global multilateral created to foster the private sector
in developing nations, has pioneered initiatives from its own direct financing,
alongside foreign investors. Its work has ranged from the creation
and promotion of the first emerging-market equity funds and indexes to
the creation and strengthening of stock exchanges and the setting of a
global benchmark for environmental and social standards for project finance
(the Equator Principles).
IFC's Role in the Evolution of Emerging Markets
Following World War II, the very concept that markets could power the rise
of poor nations was, at best, an afterthought for those who created the
Bretton Woods institutions and other key international organizations.
Postwar economic planners created the United Nations to foster geopolitical
stability, the International Monetary Fund to ensure a stable currency
exchange regime, and the World Bank to help rebuild war-torn nations and
develop poorer nations through lending to governments. Promotion of an
open trading regime was to be fostered through the Global Agreement on
Tariffs and Trade, the forerunner of the World Trade Organization.
It was not until the mid-1950s that encouraging direct investment in the
private sector of developing nations became a key part of the postwar economic
agenda. In the wake of U.S. President Harry Truman’s famous “Point Four”
foreign policy agenda, the need for an institution like IFC was promoted
as a highly experimental but pioneering “Point Five” by the New York
Times on November 13, 1954. Since its creation less than two
years later, IFC has mirrored the growth of the emerging markets:
- During the 1960s, IFC struggled to survive
but began slowly pioneering small direct investments, primarily in heavy
industries (extractive industries, cement, paper, and manufacturing).
- During the 1970s, IFC pioneered the
use of syndicated loans, which allowed commercial banks in Europe and the
United States to begin diversifying their investment portfolios into the
emerging markets. The Corporation also began to introduce new sources
of capital to enterprises in developing countries.
- During the 1980s, through the creation
of emerging market equity funds, stock markets, and the first emerging
market index, IFC helped found the equity industry in emerging markets.
From a minuscule base, the capitalization of stock markets in developing
countries has grown to nearly $5 trillion today.
- During the 1990s, IFC was a leader in
fostering privatization of formerly state-owned enterprises across the
former Soviet Union and encouraging private sector investors to invest
in the infrastructure of many developing regions, especially Latin America.
- In recent years, IFC’s role has broadened
significantly, to include:
- Issuance of a diverse array of local
currency bonds that deepen domestic capital markets. These help provide
long-term instruments for infrastructure investment.
- Introduction of derivatives and other
risk management securities into emerging markets.
- Creation of a global benchmark for environmental
and social standards in emerging market finance (the Equator Principles),
innovative public-private partnerships to preserve biodiversity, transactions
allowing emerging market companies to tap into the carbon credits market,
and initiatives supporting renewable energy and energy efficiency.
- Groundbreaking research on improving
the investment climate for small and medium entrepreneurs in the emerging
markets, published in the annual “Doing Business” report.
- IFC’s annual investments in Africa
have risen 77 percent over the past three years, to $445 million in FY05.
- During FY05, IFC’s investments in microfinance
projects increased to $323 million, representing 69 projects across 43
countries and reaching 1.2 million clients in low-income households.
- IFC has played a leading role in fostering
the development of small and medium businesses through its technical assistance
programs around the globe. It has also pioneered new methods of monitoring
and evaluating development impact.
For more information on IFC, go to www.ifc.org
For more information on EMPEA go to www.empea.net
For more information on the IFC-EMPEA Private Equity Conference, go to: