Charles “Chip” Kaye, co-president of Warburg Pincus, which manages real estate funds as well as private equity vehicles, said emerging markets are at a “tipping point” in the global private equity landscape, as the role of emerging markets increases in importance.
Kaye is a veteran of the private equity emerging markets arena, having set up Warburg Pincus' Hong Kong office in 1994 and led its push into Asia. He became co-partner of the global private equity firm in 2002.
A number of factors, such as a greater domestic consumption and higher levels of savings, mean that emerging markets are showing “increasing macro-economic stability” and “increasing independence”, Kaye said during a speech at the Emerging Markets Private Equity Forum in London run by PERENews.com's sister publication, Private Equity International.
While some emerging markets remain overly reliant on factors such as natural resources, export markets or external funding, Kaye singled out China, India and Brazil as three markets in “control of their own destinies”. He said China offers “the most significant long-run investment opportunity for investors”, noting, however, that it had not been an easy place to invest in the past, and this would not change in the future.
Warburg Pincus in March, for example, had a potentitally lucrative exit blocked when China's commerce ministry rejected Coca Cola's $2.9 billion bid for Hui Yuan Juice. Warburg owns just under 7 percent of the Chinese beverage company.
India meanwhile, Kaye considered “marginally riskier” but said it remains an attractive place to invest. He added that it is less connected to the global economy and “capable of managing its way through the economic crisis”.
On a following panel discussion, Richard Laing, the chief executive of CDC Group, said he believed India offers the best investment opportunities today. CDC Group is mandated by the UK government to invest primarily in Africa-focused funds, but, said Laing, if he could chose to invest in another market alongside those where CDC already is, it would be India. “The return from India in the long term will be very exciting,” he said.
Warburg co-head sees emerging markets 'tipping point'
Brazil, India and China show increasing independence, while other emerging markets are still overly reliant on factors like export markets, Chip Kaye told delegates at the PEI Emerging Markets Forum in London.