Washington, D.C., May 11, 2010—IFC,
a member of the World Bank Group, said today that there is a brighter outlook
for private equity investment in emerging markets as economic growth picks
up, providing investors an opportunity to achieve strong returns as they
help create jobs and improve living standards.
IFC Executive Vice President and CEO Lars Thunell said the developing world’s
faster growth and lower debt burden makes it less vulnerable to cyclical
downturns—and a more attractive destination for private equity.
“It is the early stages of a recovery that are the most promising times
to invest for private equity,” Thunell said at IFC’s 12th annual Global
Private Equity Conference, which was held in association with the Emerging
Markets Private Equity Association (EMPEA).
The performance of IFC’s $2.6 billion private equity portfolio has been
impressive. Between 2000 and the end of 2009, IFC’s private equity funds
had an internal rate of return of around 18 percent.
“Private equity in developing countries is based on growth, not leverage,”
Thunell said. “It is not as risky as people think.”
Investors haven’t been the only beneficiaries. Companies in IFC’s private
equity portfolio have employed almost 300,000 people since 2000. Job creation
at those companies, two-thirds of which are small- and medium enterprises,
far exceeds regional averages. That development impact is behind IFC’s
decision to boost its equity investments.
In response to the financial crisis, IFC scaled up its target for private
equity fund investments from $400 million to $900 million this fiscal year.
The effort has mobilized capital in some of the world’s poorest countries,
including Cameroon, Malawi, Sierra Leone, and Bangladesh.
Haydee Celaya, IFC Director, Private Equity and Investment Funds, said
domestic growth rates drive returns on private equity investments in emerging
markets. Nearly two-thirds of companies in which IFC-backed funds have
invested are focused on domestic or regional growth opportunities.
“We are committed to emerging market private equity and want to see a
broader investor base,” she said.
IFC is a leading private equity investor in emerging markets, with a portfolio
that includes over 160 funds. About one-fifth of commitments are in Africa,
where IFC’s equity investments have averaged annual returns of around
IFC, a member of the World Bank Group, creates opportunity for people to
escape poverty and improve their lives. We foster sustainable economic
growth in developing countries by supporting private sector development,
mobilizing capital for private enterprise, and providing advisory and risk
mitigation services to businesses and governments. Our new investments
totaled $14.5 billion in fiscal 2009, helping channel capital into developing
countries during the financial crisis. For more information, visit www.ifc.org
The Emerging Markets Private Equity Association (EMPEA) is an independent,
global industry association that promotes greater understanding of and
a more favorable climate for private equity investing in the emerging markets
of Africa, Asia, Central/Eastern Europe and Russia/CIS, Latin America,
and the Middle East. EMPEA’s 280 members represent a broad array of private
equity fund managers, institutional investors, service providers, and other
key stakeholders in the industry. For more information, visit www.empea.net.