Last year is a time that will be engraved on many private equity market participants’ minds, although possibly for all the wrong reasons. Even despite the diffculties of the last few months of 2008, it turned out to be a record year for emerging private equity markets in terms of fundraising as it peaked at a staggering US$66.5bn, according to Emerging Private Equity Association (EMPEA) fgures. Investment values also recorded a very respectable US$48bn, beaten only by the previous year’s US$53bn. By contrast, provisional fgures on the frst three quarters of 2009 showed a dramatic drop on both counts: fundraising was down 65% by value from the same period in 2008 and investment value by 52%.

One of the biggest factors behind this was the shock felt by limited partners (LPs), many of whom had funded their private equity fund investment programmes through the distributions received from their existing portfolios. With exits pretty much off the agenda as asset prices plummeted, liquidity became a serious issue. “We saw a fundamental change in the nature of private equity globally,” says Kof Bucknor, managing partner, Kingdom Zephyr Africa Management. “The asset class had been self-funding because of the steady fow of exits. When that stopped, LPs just couldn’t commit.”

This was aggravated by the plummeting values in LPs’ investments in other asset classes, as many found themselves ...

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