As we collected and analyzed fund and deal information for LAVCA 2014 Industry Data, one clear trend that emerged was an increase in investment activity driven by sector-focused private equity funds active in Latin America.

While in developed markets PE sector specialization is often a key part of the investment strategy, emerging markets PE investors typically combine deep knowledge of local markets, access to proprietary deal flow, and the ability to professionalize and grow traditional businesses in order to generate attractive returns for LPs.

But among the largest deals closed in 2013, many were done by global or Brazilian investors through sector-focused funds, primarily energy, infrastructure, mining, and timber funds. International energy investors were notably active, with First Reserve, EIG Global Energy Partners, Actis, and Denham Capital completing large deals in oil & gas or alternative energy across Brazil, Mexico, and Chile.

Today Brazil is home to a handful of asset management firms that have diversified across asset classes much like global firms such as Blackstone or KKR. Gavea, Brookfield, Patria, Vision, and BTG manage separate funds dedicated to multi-sector buyouts, infrastructure, real estate, or real assets.

In Mexico new private investment firms have emerged to specifically target real estate and infrastructure, spurred on by the market opportunity and the ability to raise capital from the country’s pension funds. In 2010, Mexico passed regulation creating a domestic REIT structure, or FIBRA, which has been widely adopted by local real estate investors. As a reflection of the importance of these sectors, the Mexican PE/VC association, AMEXCAP, has expanded its scope to include the most relevant investors active in real estate and infrastructure.

Outside of Brazil and Mexico, Brookfield, Ashmore, and Darby Colpatria have raised dedicated infrastructure funds for the Colombian market, and Macquarie is rumored to be preparing a pan-regional LatAm infrastructure fund.

Other industries that have been targeted recently by sector-specialized funds in Latin America are residential real estate development, agribusiness, and technology.

As a subset of real estate, a handful of managers have raised dedicated funds to target residential development projects across Latin America. The veteran in this space is Peninsula Investments, a pan-regional firm active since 2006 with two funds invested. Last year two new firms closed funds focused on residential housing development: Terranum Capital (see this month’s Member Firm Profile), and Avenida Capital, whose partners raised US$140m from Colombian, US, and European investors for retail and residential projects across Colombia. Avenida is expected to be out with a Fund II later this year.

A few firms have raised dedicated agribusiness funds, with Pampa Capital as the first mover in this space, dating back to 2005. Last year Aqua Capital closed on US$173m for an agribusiness fund investing in Brazil and the Southern Cone, and Arlon Capital is currently fundraising for a pan-regional agri-focused fund. Pampa and Aqua have targeted companies in areas such as seeds, fertilizer, or food service, rather than in agricultural land, a more complex and riskier play.

LAVCA has been tracking the year-on-year increase in technology sector deals since 2008, with close to half of all deals focused on tech in 2013. Many of these can be attributed to VC or internet investments closed by the growing universe of early stage players across the region, but sector-dedicated PE and growth equity firms have also been active in the region, notably Riverwood Capital, Silverlake, and Insight Venture Partners.

Finally, it is worth citing two veteran managers that developed sector strategies for Latin America ahead of others: Conduit Capital, which has been doing deals in the power sector since 2003, and LAEFM Colombia, which raised a dedicated oil & gas fund from Colombian pension funds in 2007, marking that country’s pension funds first commitments to PE. Today LAEFM also manages a timber fund.