The BRIC nations, consisting of Brazil, Russia, India and China, have been dubbed future world leaders and predicted to be wealthier than most of today’s economic powers by 2050. However, in 2015, economic and political difficulties troubled these nations. Chinese financial market struggles and slow growth have rippled throughout Asia, while Brazil has seen the growth of its economy grind to a halt. Nevertheless, these nations remain an integral part of the private equity industry, with this blog taking a look at investors within the BRIC countries, as well as investor appetite for the BRIC countries from the rest of the world.
Preqin’s Investor Intelligence database currently tracks 350 investors based in the BRIC region who are considering investing, or are currently investing, in the private equity asset class. This represents 6% of all active investors in private equity, almost a one percentage point increase from Q4 2014. Within the BRIC nations, China accounts for the largest proportion of LPs (60%), whereas India has 22%, Brazil hosts 15% and Russia accounts for just 3%. The order of these countries directly correlates with population size; however, the population of China is only approximately 10% larger than that of India, yet it is home to an extra 38% of BRIC-based LPs active in the private equity asset class.
By total assets under management (AUM), the major LPs based in each of the BRIC nations are Banco do Brasil, Gazprombank, State Bank of India and China Merchants Bank. The largest of these banks is China Merchants Bank, which has over $816bn in AUM and is currently considering investing in private equity.
The BRIC region continues to create a high level of interest in the provision of attractive investment opportunities for non-domestic investors. Preqin currently tracks 1,476 LPs that have previously invested in private equity vehicles that target the BRIC nations. A survey of LPs for the Preqin Investor Outlook: Alternative Assets H2 2015 shows that many investors have high expectations of the BRIC countries and are backing them for investment opportunities in the near future. The data shows that China is seen as a nation of interest by 28% of private equity investors, followed by India with 20%. Brazil and Russia proved to be less appealing to investors, with only 4% showing interest in investing in Brazil and just 2% for Russia.
One LP that has made a recent commitment to a BRIC-focused private equity fund is the International Finance Corporation (IFC), which invested in India 2020 Fund II, an India-focused growth fund which held a final close on $138mn. Another prominent investor, California Public Employees’ Retirement System (CalPERS), committed $150mn to Patria Brazilian Private Equity Fund V in 2015. This fund typically makes buyout investments with a focus on the consumer, healthcare and education sectors in Brazil. The geographic focus for this fund is split with 75% being invested within Brazil and the remaining 25% elsewhere in South America.