As we went into 2008, the prospects for emerging markets were looking rosy. Spiralling oil and commodities prices were boosting the reserves of many of the governments badly in need of capital for infrastructure spend, such as those in Russia, Central Asia, Latin America, the Middle East and Africa. Large-scale development projects were being completed or announced that were boosting growth rates and also creating opportunities for investment by nascent local private equity managers as well as the global buyout titans.

More developed markets were looking shaky as the credit crisis was starting to impact Western firms’ ability to do deals, but there was plenty of scope to expand into emerging markets, they reasoned. Faced with moribund markets at home and lured by the prospect of ever-growing pools of capital abroad, investment bankers and private equity houses set up shop in some of the key emerging market cities, with the phrase “Mumbai, Dubai, Shanghai or bye- bye” becoming a common refrain among financial services workers.

For their part, LPs across the world had really started to warm to the idea of investing in emerging markets. The previous year had seen...

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