Listen to David Wilton, CIO (IFC) discuss with Privcap’s David Snow the Global PE Conference’s transition from basements to ballrooms. Once the gathering of a handful of industry pioneers, the Global Private Equity…
IFC has invested in emerging market private equity funds since the 1980s and in 2000 created a group dedicated to investments in funds. IFC has since become a significant player in the emerging market (EM) funds space, having backed around 10% of the funds coming to market since 2000. IFC’s portfolio currently stands at around $3.0 billion committed to about 180 funds. The portfolio is widely distributed across all regions including Africa, East Asia, South Asia, Eastern Europe, Latin America and the Middle East.
IFC is a significant supporter of emerging managers. Since 2000 around 50% of funds backed by IFC have been run by 1st time managers. Once funds are successful enough to attract a strong following of commercial investors, IFC sees its role completed and moves on to find the next generation of emerging managers. Our returns on first time funds have been particularly strong and many of the managers we supported when they were starting out are now leaders in their markets. Overall, our returns on private equity fund investments since 2000 are in the top quartile of the Cambridge EM Benchmark.
IFC backs private equity funds in the emerging markets because funds, with their unique provision of both equity capital and expertise, have a significant impact on company growth and job creation. The majority of private equity in emerging markets is growth equity, using little leverage and depending on sustained growth of companies to generate returns. The private equity fund helps companies to improve focus and negotiate the transformations and risks of rapid growth. Rapidly growing companies create jobs: the average annual rate of job creation within companies backed by IFC-supported funds since 2000 has been 22%, well in advance of regional rates of job growth of 2-3%.
IFC brings its standards and policy requirements to the funds in which it invests. These include its exclusion list, environmental and social sustainability standards, governance, integrity due diligence and fund terms consistent with best market practice. Due to its presence in the market and its early support of new funds, IFC has been able to establish standards in the private equity industry in emerging markets.
Currently IFC is looking to commit up to $500 million a year in twenty to twenty-five funds globally. Our strategy currently emphasizes growth equity funds, climate change, and SME funds. We will also selectively support small business funds in frontier regions. As we seek to achieve proof of concept to subsequently attract commercial capital, we are very selective. The twenty or so funds we back each year are selected from over 200 funds we see annually.
The annual conference we sponsor in association with the Emerging Markets Private Equity Association (EMPEA) has grown from a friends and family gathering to become the premier global emerging market private equity event, attracting over 875 fund managers and investors from around the world.
More information on our experience investing in emerging market funds and what we look for in funds can be found in the News and Presentations page.