Capital International yesterday announced that it has closed its fifth emerging markets private equity fund, with $2.25 billion in capital commitments. So we have 5 Questions for Jim McGuigan, a Capital International partner focused on investor relations.
1. There’s a perception that emerging markets deals are relatively cheap. Risky, but cheap. So why raise $2.25 billion?
McGuigan: As we began to raise our fourth fund in January 2004, many of the markets we were covering were becoming stronger, more transparent and more fiscally responsible. This is particularly true in places like Russia, China, Brazil and South Africa. At the same time, we’re investing in market-leading companies – companies that are in first, second or third position in their countries – so these have become much larger-scale enterprises that require larger investment sizes to make a meaningful position.
The average investment size in our early says was just $6 million, but it’s now $100 million. The last thing we wanted to do with this fund was to marginalize ourselves, so we felt an appropriate fund size would be around $2 billion.
2. Is LP demand for emerging markets funds appropriate for GP supply, or is there an imbalance?
3. You’ve been with Capital International for eight years. In that time, are there any nations or region that have dropped off your radar because they’ve moved from emerging to emerged?
4. You’ve already invested 25% of the fund. So how long until you’re back in market?
5. Given the explosive growth of global and local emerging markets managers, has it become harder for Capital International to hire and retain key talent?
We’ve found that our 16-year franchise – our longevity – has helped us be successful in attracting attractive professionals and in keeping our senior private equity pros. Most of our partners have been with us for more than five years. I was told recently by an LP that he considered our team to be the most senior in the emerging markets, which I think was a major factor in our fundraising success.