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Frontier Markets—“Where is the Smart Money Going and Why” Is Major Theme at IFC-EMPEA Private Equity Conference, Washington, D.C.

In Washington, D.C.
Ludi Joseph

Phone:+(202) 473 7700


Umberto Pisoni
Phone:+(202) 473 9143


Washington, D.C., May 16, 2006—In recent years, the International Finance Corporation—the private sector arm of the World Bank Group—has worked to make emerging-market private equity more visible to investors. Initiatives have included working with leading industry professionals to establish the Emerging Markets Private Equity Association (EMPEA) and hosting an annual Global Private Equity Conference. This year’s conference was co-hosted with EMPEA. With a capacity crowd of over 600 delegates from over 60 countries, this conference is now the premier event for investors in the sector.

Haydee Celaya, IFC director for private equity and investment funds
, said,
Private equity is becoming an increasingly important sector globally, particularly in the United States and Europe, but also in the emerging markets. Private equity professionals are breaking down the borders of investing, recognizing that globalization is transforming the private equity business.” She added that the IFC-EMPEA conference is the largest and most comprehensive gathering of practitioners active in emerging markets private equity.

Sarah Alexander, executive director of EMPEA,
noted, “2005 was a remarkable year for the asset class with fundraising for emerging markets private equity topping $21 billion (nearly quadrupling the amount raised in 2004). Fundraising for the asset class in 2006 is expected to match or exceed the 2005 record numbers.”

“Frontier Markets: Where Is the Smart Money Going and Why” was a major theme at the IFC- EMPEA conference, May 11-12, in Washington, D.C.
Participants included managers of emerging-market funds, institutional investors, international development institutions, bankers, academics, and others who are active in the global private equity industry in the emerging markets. Participants discussed key trends and issues relevant to the industry.

David M. Rubenstein, founding partner and managing director of the Carlyle Group gave the opening address. Other speakers included Michael Klein, vice president and chief economist, IFC; and James Zukin, senior managing director, Houlihan Lokey Howard & Zukin.
 Sessions covered hedge funds in the private equity sphere; hot button topics in term sheet negotiations; alternative energy, clean technology, and carbon credits; and private equity as an asset class in the emerging markets. In addition, some discussions focused on specific regions.

IFC, celebrating its 50th anniversary, coined the term "emerging markets" in the early 1980s.
Portfolio equity investment into the emerging markets grew by more than $19 billion last year and is setting a record pace for the first half of 2006.

Antoine van Agtmael, Founder and President of Emerging Markets Management, LLC and former IFC deputy director
, said, “When I originally coined the name ‘emerging markets,’ there was no foreign portfolio investment in emerging markets. In fact, the name was designed to give a more uplifting feeling to what we had originally called the Third World Fund. So the name was born and so also was born the IFC emerging markets database and the IFC index.”

About IFC

IFC's role typically includes:

  • Acting as a catalyst for mobilizing institutional capital
  • Supporting experienced fund managers who can implement value-added strategies
  • Working with fund managers on corporate governance and sustainability at the fund and company levels
  • Enhancing the transparency and accessibility of emerging-market funds to commercial investors

From its founding in 1956 through FY05, IFC has committed more than $49 billion of its own funds and arranged $24 billion in syndications for 3,319 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY05 was $19.3 billion for its own account and $5.3 billion held for participants in loan syndications.

Today IFC is the largest multilateral provider of financing – loans, equity, risk management, and structured finance products – in the developing world.  IFC is an innovative laboratory for new, market-oriented solutions for reducing poverty and addressing environmental and social challenges.

IFC, the first global multilateral created to foster the private sector in developing nations, has pioneered initiatives from its own direct financing, alongside foreign investors.  Its work has ranged from the creation and promotion of the first emerging-market equity funds and indexes to the creation and strengthening of stock exchanges and the setting of a global benchmark for environmental and social standards for project finance (the Equator Principles).

IFC's Role in the Evolution of Emerging Markets

Following World War II, the very concept that markets could power the rise of poor nations was, at best, an afterthought for those who created the Bretton Woods institutions and other key international organizations.

Postwar economic planners created the United Nations to foster geopolitical stability, the International Monetary Fund to ensure a stable currency exchange regime, and the World Bank to help rebuild war-torn nations and develop poorer nations through lending to governments. Promotion of an open trading regime was to be fostered through the Global Agreement on Tariffs and Trade, the forerunner of the World Trade Organization.

It was not until the mid-1950s that encouraging direct investment in the private sector of developing nations became a key part of the postwar economic agenda. In the wake of U.S. President Harry Truman’s famous “Point Four” foreign policy agenda, the need for an institution like IFC was promoted as a highly experimental but pioneering “Point Five” by the New York Times on November 13, 1954.  Since its creation less than two years later, IFC has mirrored the growth of the emerging markets:
  • During the 1960s, IFC struggled to survive but began slowly pioneering small direct investments, primarily in heavy industries (extractive industries, cement, paper, and manufacturing).
  • During the 1970s, IFC pioneered the use of syndicated loans, which allowed commercial banks in Europe and the United States to begin diversifying their investment portfolios into the emerging markets.  The Corporation also began to introduce new sources of capital to enterprises in developing countries.
  • During the 1980s, through the creation of emerging market equity funds, stock markets, and the first emerging market index, IFC helped found the equity industry in emerging markets. From a minuscule base, the capitalization of stock markets in developing countries has grown to nearly $5 trillion today.
  • During the 1990s, IFC was a leader in fostering privatization of formerly state-owned enterprises across the former Soviet Union and encouraging private sector investors to invest in the infrastructure of many developing regions, especially Latin America.
  • In recent years, IFC’s role has broadened significantly, to include:
  • Issuance of a diverse array of local currency bonds that deepen domestic capital markets.  These help provide long-term instruments for infrastructure investment.
  • Introduction of derivatives and other risk management securities into emerging markets.
  • Creation of a global benchmark for environmental and social standards in emerging market finance (the Equator Principles), innovative public-private partnerships to preserve biodiversity, transactions allowing emerging market companies to tap into the carbon credits market, and initiatives supporting renewable energy and energy efficiency.
  • Groundbreaking research on improving the investment climate for small and medium entrepreneurs in the emerging markets, published in the annual “Doing Business” report.
  • IFC’s annual investments in Africa have risen 77 percent over the past three years, to $445 million in FY05.
  • During FY05, IFC’s investments in microfinance projects increased to $323 million, representing 69 projects across 43 countries and reaching 1.2 million clients in low-income households.
  • IFC has played a leading role in fostering the development of small and medium businesses through its technical assistance programs around the globe. It has also pioneered new methods of monitoring and evaluating development impact.

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