Investment in private equity markets in eastern Europe is hard work, but enthusiasts reckon it's worth the effort. "In private equity we're sweating a lot trying to turn a profit, and then we look next door and see those guys making a lot of money buying and selling in the public markets," says Philippe Belot, a senior banker at the EBRD. But "we'll be better off in the longer term. We're betting on an upturn in these economies."
In the meantime, private equity investors have the chance to buy companies on the cheap. "If Russia, the Ukraine, and others take off, it will be a real bonanza," Belot says. They will have to wait a while for a pay-off. Most private equity funds have a 10-year life, and for many it takes a minimum of four years before they can gauge their true performance given the unseasoned nature of most portfolios. It is not uncommon for six out of 10 companies in a portfolio to go bust, and for just two investments to end up being stars.
Many investment funds find this sort of uncertainty unacceptable. Invesco, a UK-based fund manager that is one of the biggest fund investors in eastern Europe, concedes that the private equity market has vast potential.