EM PE Week in Washington, D.C. – Day Two Summary
The opening panel led by Patricia Dinneen, Senior Advisor at EMPEA, discussed trends of innovation extending both to, and from, emerging markets. Will Poole of Capria Accelerator noted that to spur more innovation, local talent is not the barrier—it’s a lack of early stage capital and what he termed “mentor capital,” which Capria’s program for first-time fund managers is seeking to address. Poole stressed the importance of building the local ecosystem, rather than trying to invest globally from a remote hub, and Quona Capital’s Monica Brand Engel also reinforced that strong local ecosystems translate into more attractive markets for her firms’ investing. In terms of South-North innovation, the panel cited historical instances and shared examples of today’s growing trends. Carolyn Freund, of the Peterson Institute for International Economics, cited an Indian pharma company enhancing generics and expanding through a U.S. presence. Also noting that women are dramatically underrepresented in large-scale entrepreneurship, panelists shared a desire to support more women fund managers and entrepreneurs, agreeing that the presence of women in a company results in better performance. Looking forward, Poole pointed towards health care as a promising sector for innovation, noting that “We can’t doctor billions of people into wellness; we have to empower them,” which provides commercial opportunities for those who enable this to happen.
Okechukwu Enelamah, Nigeria’s Minister of Industry, Trade and Investment—and a former private equity professional—shared his thoughts on the future of Nigeria’s growth during a keynote interview with Aubrey Hruby, co-author of The Next Africa. While acknowledging commodity prices’ strong negative impact on the economy, Enelamah expressed confidence in his government’s ability to implement “sustainable solutions, rather than knee-jerk reactions,” including investment climate reforms which can unlock business potential across industries. Another way forward is selectivity in industries where Nigeria has a competitive advantage—such as agribusiness, petrochemicals, and light manufacturing—and, which can alleviate foreign exchange issues by reducing imports.
In a session led by Prakash Mehta of Akin Gump Strauss Hauer & Feld LLP, panelists provided insights on the global credit markets. Neil Shearing of Capital Economics commented, “Don’t conclude that there is an emerging market debt problem. It’s a China problem and a Brazil problem.” Panelists explored in depth the outlook for various types of debt in sectors and other geographies—with MassMutual Financial Group’s Bruce Stanforth weighing in on Europe, and Gulf Credit Capital Partners’ Walid Cherif discussing the Middle East. Panelists were invited to share their forecasts on the future, to which Robert Petty of Clearwater Capital Partners (and EMPEA’s Chairman) responded that there are real “survivors in sectors”: companies which, among the dozens in their industry, are strong, and which can benefit from industry consolidation. Cherif saw lending to SMEs as a significant opportunity, while Petty noted that alternative lending in Southeast Asia also looks promising. Then, returning to the big picture, the panelists cautioned that as valuations recover, increased volatility is likely to become a reality.
Rachel Kyte, CEO of Sustainable Energy for All (SE4All), delivered a “call to action” for investors to help deliver, and capitalize on, the international community’s virtually unanimous commitment to reduce carbon emissions. She noted that reducing energy consumption will require vast change, but with this comes opportunity—for solutions in clean energy generation, clean buildings and transport. Kyte cited an annual US$310 billion opportunity in global energy efficiency markets, mostly in emerging markets cities, and urged the audience to gear up for these opportunities. She concluded by noting that the energy sector, currently with only 6% women, requires more diverse teams to guide it through change. As the investors of the future, Kyte told the audience, you need to build the teams with the diversity that contributes to long-term success.
Pedro Aspe, Mexico’s former Finance Secretary and now with Evercore Partners Mexico, walked the audience through a number of reforms the Mexican government has taken to increase economic growth. These focused on the following four themes: financial, telecommunications, energy, and labor. In the telecommunications sector, for example, long-distance prices dropped 45% due to the introduction of competition, and policies on importing gas from the U.S. eased prices significantly during emergencies. Reforms take a long time, and are not easy, Aspe noted. He cited the example of a 10-year process of negotiating 43 treaties to enhance the manufacturing sector. But this has paid off, he explained, with manufacturing now representing 79% of all exports, reducing Mexico’s dependency on commodities exporting. Aspe assured the audience of the tangible benefits that come from taking a slow but steady path to reform.
The afternoon’s robust set of breakout sessions allowed participants to hear from practitioners across a number of emerging and highly relevant topics. While a set of GPs discussed deals and trends in Emerging Europe, another panel of fund managers spoke in the Southeast Asia panel about the private equity landscapes in Vietnam, Thailand, Mynamar, and the Philippines. In the following pair of breakouts, investors examined the outcomes of thoughtful fund structuring—from the Impact Investors panel that discussed how their strategies were creating successful exit outcomes to the Terms and Conditions session, where the panel explored ways that investors can achieve terms that create better alignment of interests. Later in the afternoon, another pair of breakout sessions explored challenges and opportunities across several different markets and regions, from Venture Capital to Mitigating Currency Risk. The last set of breakout sessions covered both Sustainability Best Practices, with panelists noting how far the industry has come in adopting ESG standards, and understanding its benefits; and, Co-Investments, where both LPs and GPs shared their views on how they approach these unique investment opportunities.
At this year’s Perfect Pitch, two presenters braved the main stage in front of a panel of expert judges and the audience. The presenters were praised for eloquent deliveries and convincing messages, though both were advised to be clearer from the outset about whether or not they were looking for funding at this time and how much they needed from investors. Participants and panelists debated how to strategically balance mentioning critical details, while keeping to a concise format of 2 minutes. The audience warmly congratulated the two brave presenters who set the bar high for next year!