Preqin’s October 2013 edition of Private Equity Spotlight examines the historical fundraising for frontier markets using data from Funds in Market. For this data, Preqin includes the following regions/countries under the frontier market umbrella: Middle East & North Africa (MENA), Central & Eastern Europe (CEE), Argentina, Colombia, Panama, Peru, Trinidad & Tobago, Bangladesh, Cambodia, Mongolia, Pakistan, Philippines, Sri Lanka, Vietnam, Ghana, Kenya, Mauritius, Nigeria, Zambia and Zimbabwe. The term ‘Frontier Markets’ alludes to a subset of emerging markets which have lower market capitalization and liquidity than the more developed emerging markets; they offer potential high, long term returns, and have low correlations with other markets.
Frontier markets-focused private equity fundraising so far in 2013 has already exceeded the annual amount of capital raised in 2012. As of October 2013, $3.9bn has been raised for investment in these markets, an increase on the $3.7bn raised in 2012. Frontier markets-focused fundraising reached a peak in 2007 when 61 funds raised an aggregate $11bn. A similar number of funds (55) reached a final close in 2008, but only amassed a total of $6.4bn.
The average time taken for frontier markets-focused funds to complete fundraising so far in 2013 and the previous two years has been significantly longer than that of the whole private equity market. Frontier market-focused funds closed so far in 2013 have taken an average of nearly 27 months to reach a final close, whereas the industry-wide average for 2013 stands at 18 months.
Fundraising success of frontier markets-focused vehicles has improved in recent years, rebounding from the lows of 2009 and 2010 in which 66% and 67% of funds closed funds below target, respectively. 2011 and 2012 respectively saw 55% and 53% of funds close on or above target, and so far in 2013, 53% of funds have closed above target – 47% of which managed to exceed their fundraising target.
NG Capital Partners II is the largest frontier market-focused private equity fund to reach final close this year, as of October 2013. The $600mn fund managed by Nexus Group – Peru, focuses on buyout and growth investments primarily in Peru and considers additional opportunities across the Andean region including Colombia. The fund surpassed its $500mn target. MVision Private Equity Advisers acted as placement agent.