Private equity fundraising for emerging markets halves in H1 - report

LONDON (Reuters) - Fundraising by private equity firms for emerging markets halved in the first half of 2013 from year-ago levels and investments fell by a tenth, reflecting a tougher overall backdrop for the industry, a report said on Wednesday.

Industry body EMPEA said 58 private equity funds had raised $10.8 billion in the January to June period, down 52 percent from the same time in 2012 and compared to a full-year total of $40 billion raised last year.

Capital invested meanwhile amounted to $9.5 billion in 360 deals, a fall of 11 percent from year-ago levels, according to the report from the Emerging Markets Private Equity Association. Total investments last year were $24 billion.

The group partly attributed the decline in new commitments to robust fundraising last year, when 10 emerging private equity firms raising over $1 billion each closed to new inflow. It said the "pendulum of activity is moving towards capital deployment".

But it acknowledged an "overall tough fundraising cycle".

Investor appetite for emerging markets has diminished in recent months, reflecting a sharp growth slowdown in China, India and most other big developing countries. This contrasts with economic recovery in the United States and Japan.

EMPEA said its 2013 survey showed 36 percent of investors did not plan to increase or decrease investments, up from 17 percent last year, a sign that "an increasing number of institutional investors are reaching their target level of exposure".

Emerging Asia remained the leading region for fundraising - at 63 percent - but Latin American funds increased their share to 23 percent, from 10 percent in 2012.

EMPEA said smaller private equity firms, raising less than $100 million each, are withstanding the slowdown better. These represented almost 75 percent of the funds that closed in the first half of 2013, compared to an average 5 percent in the past three years, its study showed.

"Funds of these sizes are well-positioned to take advantage of the wealth of middle-market investment opportunities available at smaller ticket sizes in these markets," EMPEA President Robert van Zwieten said in a statement.

The three biggest private equity deals in emerging markets so far in 2013 were closed in China, Kenya and Malaysia. These were valued at $1.1 billion, $600 million and $407 million respectively, EMPEA said.

(Reporting by Sujata Rao; Editing by Tommy Wilkes and Dale Hudson)