LPs are demanding that their emerging markets GPs do not rush into acquisitions, even though buying opportunities are better than ever, because they are reluctant to sell off assets to meet private equity capital calls.
“In the last six months the amount of communication we have had with our LPs has been unprecedented,” said Archana Hingorani, executive director of Indian private equity and real estate firm IL&FS Investment Managers, which closed a $525 million India Realty Fund in 2006, at a panel discussion at the PEI Media Emerging Markets Private Equity Forum in London this morning.
If you liked this stuff last year, you should love it now.
“They want to know that we are keeping some powder dry, because they do not want to sell off their listed equities now in order to make capital calls,” she added.
The urge from LPs to GPs to retain some capital comes at a time when emerging market private equity and real estate firms are hoping to accelerate investment.
A poll of conference delegates suggested that emerging markets practitioners should slow down the pace of their capital deployment in light of market conditions. However, Thomas Barry, founder and chief executive of Africa-focused Zephyr Management, argued the opposite, suggesting that “If you liked this stuff a year ago, you should love it now,” referring to the lower priced assets in the market place.
“This is a cyclical business. If we are in a down-cycle, we should be accelerating our investment,” he added.