Long-Run Returns to Private Equity in Emerging Markets.

This article provides the first comprehensive evidence on long-run risk-adjusted returns to private equity investments in emerging and frontier markets, based on 58 years of cash flow data from the International Finance Corporation (IFC) across 130 countries. The findings indicate that IFC’s diversified private equity portfolio has achieved returns comparable to the S&P 500 from 1961 to 2010, with higher returns associated with economic growth but lower returns as countries deepen banking systems and relax capital controls. The study supports the view that financial frictions and imperfect international capital market integration limit capital flows from rich to poor countries, creating opportunities for impact investors to identify or develop underserved markets. Additionally, returns vary more by country than by sector, with investments in financial institutions, infrastructure, and mining outperforming manufacturing and services, and longer holding periods and smaller investment sizes generally linked to higher returns.