Although some have said that emerging markets have slowed down over the past several years, private equity firms would beg to differ.

Back in 2013, General Atlantic CEO Bill E. Ford said, “The economic growth prospects of most of the emerging market countries where we’re active—India, China, Southeast Asia, and Latin America—are extremely attractive, and these economies are likely to grow at five percent or greater, on average, over the next five to ten years.”

Were his predictions correct? It seems so, despite some short-term upheavals.

“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, in a 2016 release from Cambridge Associates. “2015 saw the index’s second-highest full-year distribution” despite the fact that it returned less than it did in 2014.

Although the China market has shown slowing in some arenas, according to the Cambridge report, it continues to dominate emerging markets. “China-based companies continued to receive and return more capital than firms in any other region; during the fourth quarter [of 2015], the amount invested in Chinese companies was roughly three times what was invested in business in the next largest country, India.”

But 2015 was also a challenging year for PE in some emerging markets, according to Michael Rogers, Global Deputy Private Equity Leader of Ernst & Young. There was a marked drop in activity in emerging market PE investment, largely due to macroeconomic issues in China.

“These dislocations also present opportunities,” Rogers said, adding that declining valuations in China could spur more investment in the coming quarters. And of course, in August of 2016, it was revealed that the country’s annual GDP growth had fallen to a level unseen since 1990. But a slowing to 6.7 percent still meant that China’s economy is growing faster than many others.

“The thing about economic growth is that they’re doing six and a half percent, and everybody is like, ‘Oh, that’s so slow,’ but consider the fact that they’ve doubled the size of the economy in the past 14 years,” Richard Brubaker of the China-Europe International Business School in Shanghai said. “It’s still going the same speed; the only thing is that there is more mass. But the numbers are just as large as they ever were.”

In May of 2017, Pensions & Investments reported that, despite year-over-year declines in emerging markets private equity fundraising and investment, most respondents to an Emerging Markets Private Equity Association survey reported that they intend to maintain their current level of commitments for the next two years.

That corroborates Ford’s assertions in a 2017 Bloomberg interview.

“We’ve been bullish on China despite lots of mixed sentiment,” he said. “The country is succeeding in pivoting its economy from export and manufacturing to services and consumption. We’re seeing companies there generating 15 to 20 percent-plus nominal GDP growth.”

Ford said he sees two economies in China: an industrial economy that’s state-owned, which may well be in recession—but next to that is “a private sector, entrepreneur-driven economy that’s incredibly dynamic.”

“What we’ve done is directed our attention in these markets more [to] local economies. Many of the opportunities in China are based on domestic economies rather than a global economy,” Ford stated.

“One of the greatest strengths in PE is that volatility is our friend.,” Ford continued. “Volatility creates opportunity. Active capital with a long-term view, a 5- to 7-year view, can create significant opportunities, and that’s what we’re seeing now.”

It looks like Ford was right about the opportunities present in emerging markets, and even turbulence in those markets can’t change the fact that in the long term, they are very attractive to investors.

Photo: Beijing’s Financial Assets Exchange. Credit: TonyV3112 /