Tag Archives: Private Equity

Frontier Markets Opportunities and Risks, Bloomberg Edition

As part of last month’s Bloomberg Dealmakers Summit in London, the following roundtable took place, featuring Timur Issatayev of Verny Capital, Parag Saxena of New Silk Route LLC and Danladi Verheijen of Verod Capital Management. It’s 22 minutes and all worth it, but if you want the single most profound statement for my time, fast-forward to 15:10, when Parag Saxena has the following to say when asked about investment risks in South Asia:

“If you stay away from purely government-granted things you can probably do all right but sometimes that is where the opportunity is so it’s hard. To me the big surprise that I learned in India, having been in the investment business for 31 years and thinking that I have made already most of the mistakes that I was going to make in my investment life, the one that surprised me in India, and I know it’s true in Pakistan and Bangladesh too, is the lack of talent. So when I invest in the U.S., which I continue to do, I know that even for a pretty tough to fill job, in 120 days to 180 days I can fill almost any job. And so typically now at my age, I get resumes from my friends’ children. I used to get them from my friends at one point and now I get them from my friends’ children. And in the US I think it’s going to be hard to actually place them because there is so much talent available for a limited number of jobs. In India, I find myself grabbing every resume because I can hire baristas for somebody that wants a summer internship job, we have a restaurant company and cellular tower company and we need CEOs, so I can hire CEOs for those companies, and everything in between. So the biggest surprise to me, and the opportunity, is training for lower level jobs. And that’s a real unexpected risk, because time is the enemy of internal rate of return and if it’s going to take you more time to fill these slots and you can’t get stuff done, you have a real problem.”

Here’s the video in full:

Caravel Management makes a case for Frontier Markets

You may have heard by now that the jig is up on the BRIC acronym as an investment class. But we’ll all still have to spend at least another couple years discussing how it doesn’t work, so if you’re just getting used to BRIC, fear not, you can still throw that one around and give the appearance of knowing what you’re talking about.

In any event, I have a new investment theme acronym. This is better than CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa), MIST (Mexico, Indonesia, South Korea, Turkey), PIIGS (Portugal, Italy, Ireland, Greece, Spain), CASSH (Canada, Australia, Singapore, Switzerland, Hong Kong) and even SWAG (Silver, Wine, Art, Gold).

Ready? Here it is: VIMBENT.

You heard that here first.

Vietnam
Indonesia
Mexico
Bangladesh
Egypt
Nigeria
Turkey

These, apparently, are the countries New York-based Caravel Management is invested in, according to a Bloomberg interview with portfolio manager Caglar Somek earlier this week:

There’s only so much one can fit into a six-minute segment, so to the credit of both interviewer and interviewee, here’s what seem to be the main ideas behind the VIMBENT strategy:
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The African Opportunity, as told by statistics

I’m not sure a) how much I believe these statistics or b) if they are true, how meaningful they are, but nevertheless, they’re out there:

  • 20%: The annual growth in mobile phone sales in Africa in each of the past five years
  • 1,400: The number of KFC outlets that Yum Brands plans to have in Africa by 2014, twice as many as in 2010
  • 60%: Percentage of the world’s uncultivated arable land in Africa
  • 4: The number of major African wars today down from 12 in the mid-1990s
  • 48%: Percentage by which secondary school enrolment in Africa rose between 2000 and 2008.

From James Ashton at the Independent (UK).

How Emerging Markets Private Equity due diligence is different

Kroll Advisory Solutions recently released a survey of 50 emerging markets private equity firms in the UK focusing on due diligence procedures. There’s a lot of fun stuff in here, but to me these two Venn diagrams offer the most pronounced difference between investing in developed markets versus the rest of the world:

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EMPEA’s Sarah Alexander on a post-BRIC world

An old saw from the journalism universe has it that once you start hearing the same quotes from different people, it means one of two things: either you’ve reported the hell out of the story and it’s time to start writing; or you haven’t dug deeply enough and have more reporting to do.

Helpful, right?

Anyway, Emerging Markets Private Equity Association President Sarah Alexander was on CNBC yesterday saying some things that I know I’ve heard somewhere before…I just can’t remember where…

Basically, for those looking for more assurance they’re not alone, EMPEA members apparently like these countries and regions:

Turkey
Indonesia
Sub-Saharan Africa
Colombia
Peru
Mexico

…and these industries:

Health care
Pharmaceuticals
Consumer goods
Infrastructure

Is there an echo in here?

Assessing the Private Equity Scene in Africa

From Avanz Capital, a rather thorough profile of the private equity scene in Africa. To begin with, South Africa clearly rules the roost:

Here’s a good global frame of reference for the overall environment:

There are 158 private equity funds (115 fund managers) in Africa with a total of $32.9 billion in capital closed since 2002 or currently being raised (avg. fund size is $216.5 million). Of the 158 funds, 60% have a fund size below $200 million, 32% are in the middle market ($200-800 million) and only six have fund sizes above $800 million. This compares to emerging Asia where there are 427 funds (286 fund managers) with a total of $184.3 billion in capital closed since 2002 or currently being raised (avg. fund size is $475 million). Latin America has a similar number of funds to Africa at 165 and number of fund managers at 110 but the total capital closed since 2002 or being raised currently at $54.0 billion and the average fund size of $330 million are nearly double that of Africa. Continue reading

Global venture capital shifting toward emerging markets

There are a lot of headline-worthy findings in Ernst and Young’s recent report on Global Venture Capital: VC money is shifting toward emerging markets; China’s VC industry reached record heights in 2011 and will soon surpass Europe as the world’s second-largest venture hub for fund-raising; global “dry powder”, i.e., capital committed to VC firms but not yet invested, is US$117.7 billion…and plenty more. But because pictures tell more than words, what strikes me most are the graphs. And there are plenty of graphs too, but the most telling ones to me are these:
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Emerging Markets Private Equity Tally 2011

The Emerging Markets Private Equity Association recently released its annual tally of fundraising and the headline appears to be that China and Brazil dominate:

China and Brazil dominated the fundraising landscape in 2011, with funds focused on these markets raising US$23.7 billion, capturing 61% of all capital raised last year and an increase on the US$8.6 billion raised for the two markets in 2010. Fundraising for both countries reached record highs with funds dedicated to China raising US$16.6 billion, surpassing the 2008 peak of US$14.5 billion, and funds dedicated to Brazil raising US$7.1 billion, surpassing the 2008 peak of US$3.6 billion.

Though according to Africa Assets, the EMPEA’s Africa estimate of US$1.3 billion raised and US$1 billion invested may understate actual figures by 3x:
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Investing in Africa: Risks, Opportunities, Challenges [Part 1]

Lots of stuff in here for Frontier Markets junkies. Foreign investment in Africa is up by an average of 80 percent over the past decade and forecasts indicate it’s likely to reach $150 billion by 2015, so this is a big topic that I already know I’m going to come back to.
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