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Neuberger Berman Favors Private Equity in Latin America

24 October 2013

(WSJ) Neuberger Berman, the former asset-management firm of Lehman Brothers Holdings that is now majority-owned by its employees, is hoping to seize private equity opportunities in Latin America.

“We really like Latin America right now,” Neuberger Berman’s Head of Alternative Investments Anthony Tutrone said in an interview with The Wall Street Journal, naming five countries in particular–Colombia, Peru, Chile, Brazil and Mexico.

“Similar to Australia, our interest in Latin America is not in the private equity transactions that are natural resources related,” he said. “It’s more the burgeoning growth in the middle class who want more consumer products, retail, healthcare, financial services, education so you have a tremendous tailwind behind those industries.”

Neuberger Berman’s alternative investments unit–which had US$18 billion under management as at Sept 30–invests in existing private equity funds and directly in deals alongside those funds, among other strategies.

Mr. Tutrone said that because public markets in the region remain highly valued and dominated by natural resource companies and banks, private equity is well suited to invest in the sectors that serve the middle class.

“It sets up for a great future arbitrage because end buyers are often multinationals seeking to enter the market, or when you take companies public, there’s appetite from pension funds to invest.”

Neuberger Berman, which opened a Buenos Aires office in 2011 to serve pension funds in the region, could expand its on-the-ground presence.

“Our global footprint is strong, I can’t see any holes, but the one market that we could use more density in, in the short-term is South America. I assume that we’ll open at least one more office there in the next 12 to 18 months,” Mr. Tutrone said.

Separately, Mr. Tutrone said he remained bullish about the role private equity can play in China, where deals are dominated by minority stakes.

“I think China’s a very tough market, but I think it will change,” he said. “I think it’s inevitable there will be greater transparency, a relaxation of foreign ownership requirements as [regulators] try to attract more private equity capital.

“It’s not that China needs the capital, but we believe they’ll recognize, like other developed and emerging regulators, that growth can be supported by this opportunistic pool of capital that is willing to invest where other money won’t go,” he added.