ASEAN Perspectives #12: Quantifying FX impact on Private Equity returns
When it comes to evaluating private equity opportunities, the conversation and analysis usually centres around familiar metrics such as TVPI, IRR and DPI, the latter being rather in vogue. With Emerging Markets comes an additional important variable which can meaningfully reshape return outcomes: foreign exchange variations.
Over a fund’s life, local currency returns can turn out markedly different from ones in investors’ reference currency, typically USD or EUR. This is particularly acute for ASEAN private equity due to its diverse set of currencies and ensuing FX volatility which undoubtedly impact outcomes. When speaking to prospective investors, this topic consistently comes up, therefore, we decided to produce some analysis to address this prevalent concern.
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