Private Equity Looks to Africa and South Asia for Deals; EMERGING MARKETS

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Private equity continues to show signs of life in emerging markets despite drying up in the West, the manager of an emerging fund of funds said, but even in frontier African markets firms and funds are feeling the pinch.

CDC, wholly-owned by the British Government and investing in private equity mainly in South Asia and Africa, said it would continue to make new deals, in spite of the crisis, and believed higher growth in emerging markets would continue and deliver greater returns.

CDC currently has net assets of pounds 2.7 billion, having received its startup funding from the British Government in the 90s and continually reinvested the proceeds, mainly in locally owned and run private equity funds.

"What we have seen recently - slightly to our surprise - is that transactions are still going on," CDC chief executive Richard Laing said.

"If the recession starts to turn, that will be a good time to invest. I am confident 2009 and 2010 will be vintage years for private equity because valuations have come down so much."

He said CDC had invested about pounds 470 million last year and another pounds 100 million in the first quarter of 2009, and expected to increase its investments towards the year end.

In the short term, he said some of the local fund managers CDC was working with were holding back, finding that investee companies were demanding too high prices and had not yet adapted to the slump in valuations from the financial crisis.

"It is taking time for them to accept that their businesses are not worth what they thought they were worth," he said. …