Photo: The Fresh Express
A new survey by Coller Capital and the Emerging Markets Private Equity Association (EMPEA) has found that 57% of private equity investors are planning to increase their focus on emerging market companies over the next two years.This is especially good news for the stocks of companies with relatively stable businesses and low amounts of debt (the perfect targets for leveraged buy-outs).
“Investors are clearly drawn to markets with strong underlying growth, which trumps leverage in driving returns,” said EMPEA President and Chief Executive Sarah Alexander.
Many investors see emerging market investments outperforming European and U.S. markets. Over three quarters expect emerging market net returns to exceed 16 per cent over a three- to five-year period, compared with 29 per cent seeing similar returns from their global portfolio, the survey found.
“In a number of these markets, particularly China, India and Brazil, the environment has changed; there’s more stability, there’s better governance, there are more factors allowing for those returns to be generated,” said Coller partner Erwin Roex.
More stability and better governance? Not only have investors started to see emerging market bonds as less risky than some developed nation ones, but they’ve begun to see emerging market companies in a similar light.
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