Skip to content

LAVCA in the News

Door To Latin American LPs Slowly Creaking Open

20 July 2011

By Hillary Canada

The Wall Street Journal

July 20, 2011— In the “fiercely competitive” fund-raising market, general partners are increasingly looking to geographies outside the U.S. and Europe for new limited partners.

Anyone looking to Latin America for such investors may be interested in thumbing through the latest report out from the Emerging Markets Private Equity Association, which summarizes the regulatory environment throughout Brazil, Colombia, Peru, Mexico and Chile and includes a directory of local pension funds and associations within those countries.

The report notes that the region’s rapidly growing populations have grown assets under management by as much as 20% per year at some pension funds. But even as assets are growing, investment opportunities in the public sector of some of these countries are not keeping pace- meaning PE firms may be able to reap the benefits of a funding overhang.

Despite getting burned in the nineties, Chile’s pension reform has led to similar program revisions throughout the region. And as Partners Group mentioned in its Latin America report last week, the area is also benefitting from macroeconomic and fiscal policies geared toward increasing economic growth and the size of the middle class.

Cate Ambrose, president of the Latin American Venture Capital Association, notes that Latin American pension funds are managing roughly $645 billion, and according to some estimates, between $20 billion and $25 billion may be available for PE investments.

But for foreign general partners, accessing that cash is easier said than done. Ambrose notes that Brazil and Mexico are still focused almost exclusively on domestic investment, whereas regulatory demands – including setting up a feeder fund in Chile or winning approval of the banking superintendent in Peru – may add to the “confusion as to the opportunity for global firms aiming to raise capital in Latin America.”

“Global firms should be prepared to invest significant time and effort into tapping that potential,” writes Ambrose.

Click here for information on how to access the full report.