Mapping Returns of Private Equity Investments in Emerging Markets

Florian Moelders and Edgar Salgado Chavez

No 11025, Policy Research Working Paper Series from The World Bank

Abstract: This paper fills a gap in research on private equity investments in emerging markets and developing economies. It provides descriptive evidence and examines the distribution of returns across sectors such as finance, technology, and resource-intensive industries like mining, where significant variation exists. Using data from the International Finance Corporation, the analysis finds that return distributions exhibit "fat tails", with a notable presence of investments yielding extremely high returns alongside others generating little or no return, highlighting the importance of diversification. The analysis reveals that firm-specific factors account for the largest share of return variability, with country and sector factors playing a smaller role. Gross domestic product growth and real exchange depreciation are significantly related to returns, with median elasticities of 0.35 and -0.67, respectively.

Date: 2025-01-08
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