Emerging market PE and VC investments outperform non-US developed counterpart in Q4 2015

BY Fraser Tennant

Emerging market private equity (PE) and venture capital (VC) investments outperformed their non-US developed market counterparts during the final quarter of 2015, according to a report released this week by Cambridge Associates.

The report, one of Cambridge Associates’ quarterly benchmarks indexes, attributes the strong performance of emerging markets to strong exit environments in both the European and Asian regions. The index also highlights a weak euro as being a factor in bringing down non-US developed market returns (when measured in US dollars).

"In Q4 2015, investors in emerging market PE and VC funds enjoyed the fourth-largest quarterly distribution in the history of the index," said Vish Ramaswami, managing director at Cambridge Associates. “2015 saw the index's second-highest full-year distribution. And although the index returned less last year than in 2014, strong performance by media and IT companies drove solid returns for private investors in emerging markets.”

Drilling down, the Cambridge Associates Emerging Markets PE and VC Index increased 5.1 percent for the quarter and 8.5 percent for the year, a drop of almost 6 percent from its double-digit 2014 year-end result. In comparison, the Global ex US (non-US developed) Markets PE and VC Index’ returned 2 percent in US dollar terms in Q4, bringing the return for the year to 5.7 percent, a marginal improvement over 2014.

"Distributions to investors in non-US developed market PE and VC funds outpaced contributions for the fifth consecutive year in 2015, reaching a record high,” said Andrea Auerbach, head of global investment research at Cambridge Associates. “These payouts largely benefited investors in funds launched in 2005 through 2008, 2010 and 2012, who received over 80 percent of distributions."

Media was by far the best-performing sector in emerging markets PE/VC in 4Q 2015, returning 30.2 percent for the quarter and 55.8 percent for the year to investors. The second-best performer (for the quarter) was found to be manufacturing with a 7.5 percent return, while IT posted a 21.2 percent return for the year. As far as jurisdictional sway is concerned, China dominates emerging markets PE and VC at present.

Cambridge Associates derives its emerging markets and non-US developed PE/VC indexes from data compiled from institutional quality funds raised between 1986 and 2015.

Report: Global ex US PE/VC Benchmark Commentary - Quarter and Year Ending December 31, 2015

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