US Pacific-Based Investors Targeting Private Equity Opportunities in Emerging Markets - April 2013

by Firakh Patel

  • 11 Apr 2013
  • PE

With ongoing uncertainty in more developed regions, interest in emerging markets has continued to grow. Preqin’s Investor Intelligence database currently tracks 1,380 LPs with a preference for emerging markets, 136 of which are based in the Pacific region of the US, which includes California, Washington, Oregon, Hawaii and Alaska. Investing in emerging markets provides portfolio diversification and as a result of greater instability in the financial markets, investors are looking towards the region for better opportunities in the private equity asset class. Pacific-based investors have almost $3tn in aggregate funds under management, with over $146bn allocated to the private equity asset class.

California-based LPs make up the greatest proportion of Pacific-based investors seeking emerging market-focused funds, accounting for almost three quarters (74%) of all LPs in the region. Firms in Washington account for the second highest proportion of investors at 11%, followed by Oregon (9%). Both Alaska and Hawaii-based LPs make up a further 3%, respectively. Pacific-based LPs (excluding fund of funds managers) are on average above their target allocations to private equity, which stands at 12.3% of total assets, compared with an average current allocation to the asset class of 13.4% of total assets.

Among investors actively investing in emerging markets is Oregon State Treasury (OST). The $62.4bn public pension fund recently made a commitment to a China-focused growth vehicle, CDH China Fund V, which follows the same investment strategy as its predecessor vehicles, focusing predominantly on growth opportunities in China.  Another prolific US Pacific-based private equity investor is Washington State Investment Board (WSIB), which has re-upped with Affinity Equity Partners for its fourth fund, Affinity Asia Pacific Fund IV. It is an Asia-focused buyout fund targeting South Korea, Greater China, and ASEAN countries.

US Pacific-based investors continue to be a major player in the emerging markets landscape as many LPs are looking to make new commitments to private equity funds in the region over the next 12 months.

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