Washington DC — An increasing number of global investors are carrying out due diligence in Latin America, evaluating the track records of private equity firms active in the region. At the same time, many local managers seeking institutional capital for their first funds are challenged to bring investors on board without a proven record of deals and exits.

The current mismatch between the amount of capital ready to be deployed in Latin America and the number of PE firms with a history of exits is belied by 2007 regional fundraising data: of the $4.4bn total, $2.6bn was raised by just two firms, Advent International and GP Investimentos, and a handful of additional firms raised most of the remaining $1.8bn.

At a recent panel in Washington I had the opportunity to question four managers on their fundraising strategies and the path to establishing credibility with institutional investors. Alberto Pasco-Font of Peruvian firm Enfoca SAFI recognized the challenges of raising a first time fund, particularly in a country where private equity as an asset class is not well developed or understood. Enfoca leveraged its eight-year track record as a boutique merchant bank in Peru to close US$55m for its Descubridor 1 fund in August 2007. "Our relationships with the local financial community were definitely helpful. Most importantly, we were able to tap highly liquid local pension funds - the four funds administer a total of US$22bn. They are looking to invest most of these resources locally because of regulations, and they are open to exploring private equity," said Pasco-Font.

Colombia is another country where local pension funds are playing a major role in supporting new managers. "In August 2007 we were able to close on over US$100m with commitments from all four of the Colombian pension funds and the IFC," commented Luc Gerard of Tribecapital Partners. In order to raise a first fund in that market, Gerard put together a team of professionals with resumes in M&A and operating experience in industry, to mitigate the lack of a specific track record in PE. The general partners put up 25% of the total that they were seeking to raise in Colombia and used that capital to acquire companies in advance of setting up their first fund - the idea was to demonstrate to potential investors the firm's investment strategy and capacity for deal origination.

Another theme that emerged on the panel was the role of multilateral or development finance institutions in funding first-time managers. Alex Rossi of Latin Idea, a Mexican firm targeting early stage growth capital opportunities, cites initial commitments from the Multilateral Investment Fund and the Mexico's Nacional Financiera as critical to reaching a first closing for their fund. "They did thorough due diligence and made a significant capital commitment after a rigorous evaluation process. Those commitments had meaningful conditions attached to them, including, most significantly, a requirement to raise a minimum amount of private sector capital. MIF and Nafin served as a powerful calling card as we were raising our fund, by increasing our credibility among other investors."

Some managers are experimenting with new models to tap new potential sources of capital. In Brazil, Andre Burger has launched the FAMA Private Equity Fund I as a joint-venture between FAMA Private Equity and local asset manager Credit Suisse Hedging Griffo (CSHG). The jv seeks to close $R400m by late August, and is aiming to raise 70% of that from Brazilian retail investors with a minimum commitment of $R100m per investor. "FAMA PE is managing the fund and CSHG is doing the fundraising," explained Burger. "The association FAMA-CSHG capitalizes on FAMA´s 15-year record as an active investor in small caps on public exchanges - private equity is seen as a natural step forward. And CSGH sees demand for private equity as an asset class from its customers (individual investors), so they are providing a vehicle."

June 3 — A proposal to create a law that establishes and governs a new Brazilian sovereign wealth fund (SWF) could reach Congress this week, laying the foundation for a controversial move by the finance ministry to stem the appreciation of the BRL. The purpose is to stabilize FX flows and stem rapid appreciation of the BRL, says finance minister Guido Mantega. Analysts commend the decision not to spend the extra revenue, but do not see the need to create a special vehicle, noting that Brazilian assets make poor counter-cyclical investments. LatinFinance

May 13 — Institutional investors continue to increase their commitments to private equity funds in emerging markets despite recent turmoil in developed markets, according to a survey by the Emerging Markets Private Equity Association (EMPEA). Seventy-four percent of Limited Partners (LPs) surveyed expect to increase commitments to emerging markets private equity over the next three to five years. Asia dominates, with 89 percent of LPs expecting to invest there within the next three to five years. Seventy-five percent of LPs plan to invest in Central/Eastern Europe within the same period. Fifty-two percent of LPs surveyed expect to invest in Africa in the medium term, while 65 percent plan commitments to Latin America funds, and 35 percent project they will be investing in the Middle East by 2013. EMPEA Full Story

June 3 — Aureos Capital's Emerge Central America Growth Fund (EMERGE) has acquired a 49% stake in a management buyout of Horizontes, a Costa Rican pioneer in the sustainable tourism industry. Horizontes has won national and international awards for its work, such as the Corporate "Green Globe" award, and is a member of organizations such as the World Wildlife Federation (WWF) and The International Ecotourism Society (TIES). Aureos believes that it is a niche area that will grow significantly in the coming years. Aureos Capital Full Story

May 29 — Temasek is targeting Latin America and the fast-growing economies of Brazil and Mexico in the latest phase of its global expansion. The Singapore sovereign wealth fund has hired Lorenzo Gonzalez, the former chief executive of Barclays in Mexico, as its managing director in the country. Alan Thompson, Temasek's managing director for investment in Latin America, will move to São Paulo later this year. Temasek has an investment portfolio worth S$164bn (€76.9bn). More than 75% of its investments are based in Singapore and Asia. Temasek Holdings Full Story (Available in English, Spanish and Portuguese)

May 28 — Brazil's Lupatech, a manufacturer of valves for the oil and gas exploration industry, and private equity firm Axxon Group have acquired the Argentine assets of ASPRO, the world's biggest natural gas vehicular (NGV) compression system manufacturer. Latin Lawyer

May 23 — Aureos Latin America Fund (ALAF) has invested US$ 5 million in the Mexican transportation equipment leasing company Analistas de Recursos Globales, S.A. de C.V. (ARG), to take a controlling stake in the company. ARG provides operating leases of transportation equipment and provides fleet management services for small and medium-sized companies. Aureos sees the investment in ARG as a cornerstone to additional investments in this sector. Aueros Capital Full Story

May 23 — Brazil-based private equity firm DGF has raised US$75 million out of a targeted US$200 million for its Terra Viva Equity Fund, which will primarily target Brazil's ethanol industry. Separately, Brazilian Development Bank (BNDES) is seeking investors for its Fundo Brasil Sustentabilidade, which is targeting between US$150 million and US$250 million in committed capital and will target Brazil's renewable power sector, including ethanol. Financial News

May 22 — US private equity companies the Carlyle Group and Riverstone Renewable Energy Fund (Riverstone) have bought a stake in an Argentine biofuels producer. Latin Lawyer

May 19 — Colombia-based private equity firm Tribecapital Partners committed US$25 million to PetroLatina, an oil and gas exploration and production company focused on Colombia, with interests in Guatemala. The investment was made through Tribeca Oil and Gas, Inc. (TOGI), a portfolio investment company of Tribecapital. Tribecapital Partners Full Story

May 19 — London-based Capital International has closed its CIPEF V Fund, an EM-focused vehicle, at $2.25m. Jim McGuigan, a partner at the firm, says LatAm has represented a growing piece of CIPEF's EM business. The company has already made six investments from the new fund, including a private equity consortium to acquired McDonald's LatAm franchises, called Arcos Dorados, for US$700m. CIPEF has been investing in Latin America since 2000 and has deployed US$355m across eight investments. Capital International Full Story

May 19 — EMP Latin American Management LLC (EMPLA) announced that the AIG-GE Capital Latin American Infrastructure Fund L.P. (LAIF) has fully divested its 9.7% shareholding in Transredes S.A. LAIF, the third largest private shareholder in Transredes, sold on April 24th the entirety of its stake to state-owned YPFB through the Bolivian stock exchange. EMP Global Full Story

May 15 — A private equity fund managed by financial company Vision Brazil Investments has invested R$100million (US$59 million) in Cotril Alimentos, one of the country's largest cattle feed groups. Latin Lawyer

May 15 — Aureos Capital's Emerge Central America Growth Fund (EMERGE) has signed a cooperation agreement with an authorized sponsor of MAPA, Costa Rica's junior stock market. MAPA was created by Costa Rica's main stock market, the Bolsa Nacional de Valores, to help fund small companies with growth potential. Under the agreement the EMERGE fund will receive, among other services, preferential access to invest in MAPA-sponsored companies. Aureos Capital Full Story

May 14 — Fundo Nordeste, a Brazilian venture capital fund, has sold its investment in Qualytextil S.A., based in Salvador Bahia, Brazil, to Lakeland Industries Inc., a US market leader firm in protective apparel. Lakeland paid approximately USD$13.3 million at closing. With this acquisition the US firm intends to accelerate its entry into high growth markets outside of North America. Lakeland Industries Full Story

May 14 — Private equity firm JER Partners, which focuses on investments in real estate-related companies, is expanding further into Latin America by opening a Mexico City office led by Sergio Hernandez. JER Full Story

May 13 — GP Investimentos has acquired a 20% stake in Estacio Participacoes, the largest private post-secondary education institutional in Brazil, for R$259m, or R$5.50 per share. Estacio has approximately 198,000 students enrolled throughout 13 Brazilian states, and reported net revenues of R$860m and EBITDA of R$101m in 2007. GP Investimentos Full Story

May 12 — AIG Investments has made a $65 million equity investment in Calyx Agro Ltd., a platform sponsored by Louis Dreyfus Commodities to acquire, develop, operate and sell agricultural land in Latin America (primarily in Brazil). The equity investment will be funded primarily by AIG Brazil Special Situations Fund II, L.P. ("BSSF II") and Louis Dreyfus Commodities CA Holdings Ltd. Calyx Agro plans to capitalize on the region's growing agribusiness sector and potential for farmland appreciation by acquiring land that is presently operating with low technology or used for livestock breeding. AIG Investments Full Story

May 6 — EMP Latin American Management LLC announced that the AIG-GE Capital Latin American Infrastructure Fund L.P. (LAIF) has fully divested its remaining shareholding in Axtel S.A.B. de C.V., Mexico's largest competitive local exchange carrier. As part of the IPO in late 2005, LAIF had already sold roughly half of its initial 15% participation and during the first half of 2007 the Fund sold another third of its original shareholding. EMP Global Full Story

April 30 — Nexxus Capital has closed its third Private Equity Fund, Nexxus III, with total commitments of US$ 144 million. Currently, the Mexican Fund has two portfolio investments, Crédito Real S.A. de C.V. SOFOM, E.N.R and Harmon Hall Holding, S. de R.L. de C.V. Nexxus III continues actively pursuing other transactions in the health, tourism, housing, retail, consumer products and services sectors. Nexxus Capital Full Story (English) Full Story (Spanish)