Asia-active GPs hoping to capture investor interest may want to rethink their portfolio strategy in light of fresh research.
Fewer than 13 percent of investors globally plan to target private equity investment in India during 2013, according to a recent study by Probitas Partners which surveyed 126 LPs worldwide. The figure compares to the 30 percent of respondents who targeted India during 2012, pointing to a continued despondency over the lack of returns coming from country-focused GPs.
In contrast, investor interest in Southeast Asia has increased over the past two years, driven by the focus on Indonesia and a desire to diversify away from China, the report said.
A number of global firms have bolstered their Southeast Asia capabilities this year, with Kohlberg Kravis Roberts opening a Singapore office in October and The Carlyle Group sealing its first-ever deal in the region in Indonesia.
Nevertheless, China remains the first choice investment destination in the region, with 44 percent of respondents believing the country offers the best opportunities compared to 28 percent in 2007.
India was not even one of the top four preferred Asian investment destinations in this year’s survey; by contrast, it matched China’s 28 percent in the 2007 edition of the survey.
Respondents identified their main reason for investing in emerging markets as strong long-term growth in a number of the economies.
The LPs also said the biggest deterrent to investing in emerging markets globally was the degree of political, currency or economic risk and that their biggest fear for private equity globally was that economic difficulties will impact alternative investment returns.
India in particular has experienced widespread economic and political uncertainty this year, as well as a plummeting currency, which impacted Indian firms’ exit capabilities. Sanjiv Kaul, managing partner at ChrysCapital, said earlier, “Private equity has to accept this new normal of one dollar at INR50 or more and factor this currency depreciation into its exit determination."