Peru's Invertir Project: Five New VC Funds Expected In 2007
01/03/2007
Author:
Magda Simons
Procapitales
Lima, Perú
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The Invertir Project, launched 3 years ago to support efforts to promote Peru’s capital markets with emphasis on the VC industry, has begun to show results. By year-end 2006 Invertir – a project of The Peruvian Association for Capital Market Development (Procapitales) and the Multilateral Investment Fund (MIF), with additional support from the Peruvian Private Pension Funds Association (AAFPs) – has seen nine funds in formation, of which at least five are expected to be in the market next year.
Article:First Call Completed for Proposals for New VC Fund Formation in Peru :
A successful step for Peru’s venture capital industry
Contact:
Magda Simons
msimons@procapitales.org
Five New Peruvian Venture Funds Expected in 2007
January 3, 2007 | Lima, Peru -- The Invertir Project, launched 3 years ago to support efforts to promote Peru’s capital markets with emphasis on the VC industry, has begun to show results.
By year-end 2006 Invertir – a project of The Peruvian Association for Capital Market Development (Procapitales) and the Multilateral Investment Fund (MIF), with additional support from the Peruvian Private Pension Funds Association (AAFPs) – has seen nine funds in formation, of which at least five are expected to be in the market next year.
Catalyzing Peru’s Venture Industry: The Invertir Project
The work of the Invertir Project is complemented by the successful growth of the Peruvian economy. Peru’s GDP has grown around 7%, inflation is low, and the country shows a positive trade balance with a very good fiscal result. The country risk indicator is at its lowest level. The assets under management (AUM) of private pension funds now constitute 14% of the GDP, representing almost 14 billion dollars -- an amount that is increasing by 2 billion every year. In short, Peru is a developing country with an excess of liquidity and a lot of opportunities.
Given the great liquidity of Peru’s pension funds, the Invertir Project believes that it is crucial to facilitate the entry of Peru’s small and medium size enterprises (SMEs) into the capital markets. Since Peru’s pension funds are not allowed to invest directly in SMEs but may use investment funds as vehicles to support them, the development of the venture capital industry takes on a greater role and relevance.
The Invertir Project therefore has as one of its main goals the development and consolidation of the venture capital industry in Peru. Its aim is to establish an investment process that can be used by institutional investors and other agencies looking to diversify their assets.
In line with this goal, the Invertir Project has created a consortium of investors in a “Funds Incubator” to analyze and perform due diligence on proposals for the formation of VC funds. The Invertir Project team – benefiting from the prior experience of Brazil’s INOVAR Project (also supported by the MIF) – worked with investors as well as potential fund managers to create this consortium.
“We not only searched for proposals for VC funds but, to some extent, had to find local and international managers interested in generating funds in the country,” said Daniel Cordova, Director of the Invertir Project.
The Invertir Project’s Fund Incubator: A Successful 1st Call for Proposals
The Invertir Project’s 1st Call for Proposals was issued, and the teams presented their proposals on December 12th and 13th, 2006. Potential investors were invited to attend the proposal presentations.
Susana Garcia-Robles, MIF senior investment officer and leader of the INOVAR initiative in Brazil, expressed her satisfaction with this first event.
“Having lived through five years of implementing this methodology in Brazil, and seeing the good results it has brought to the VC industry there, I feel very confident that Invertir has started a process that will help establish and consolidate the VC industry in Peru,” she said. “All the proposals were very good and done with great professionalism. Peru is on the right track to develop this industry.”
The investor group was comprised of the four private pension funds operating in Peru, the MIF, two insurance companies and the government Financial Corporation for Development (COFIDE). The group studied nine proposals of new VC funds (eight Peruvian and one Regional). Also present at the meeting was Elizabeth Prada, head of Colombia Capital -- a program managed by the Bogota Stock Exchange and inspired by the Invertir and INOVAR Projects. Colombia Capital brought to the Invertir event a proposal of a Colombian Regional Investment Fund.
The nine proposals were presented by eight managers: AC Capitales SAFI, Arowana SAC, Capital Investments SAFI, Grupo Coril SAF, Enfoca SAC, Grupo NC&F, Value Investments Peru SAFI and Tribeca Capital Partners de Colombia. In sum these projects represent approximately US$ 600 million in potential investment. Most proposals concentrate in exports and are expected to invest in attractive growing companies in the agribusiness, services and manufacturing sectors.
Following two days of analysis and presentations, the investor group decided to invite seven potential funds to participate in a due diligence process for in depth analysis. After completion of each fund’s due diligence process, the investors will independently decide whether to invest or not in that fund.
The Invertir team expects that at least five of the funds invited to proceed to further due diligence will start operating in the market by the end of of 2007. During 2007 Invertir will launch a second call for Proposals for the Incubator.
Lima, January 3, 2007
For more information please contact:
Magda Simons
Email: msimons@procapitales.org