by Joanna Glasner
September 11, 2012 – Private equity limited partners have considerably increased Latin American investments in recent years, and new data indicates they will want to continue.
Two-thirds of those already investing in the region say they plan to maintain or raise allocations in the next year, according to a survey published today by the Latin American Private Equity & Venture Capital Association (LAVCA) and Coller Capital.
The survey, which included input from 105 private equity investors worldwide, found that LPs active in Latin America saw the region’s economic growth potential and deal flow as the its biggest strengths. Underdeveloped IPO and M&A markets and the regulatory and tax environments were cited as Latin America’s weakest points.
The findings come on the heels of what has been a robust fund-raising climate for Latin America-focused venture and private equity firms. In 2011, funds in the region raised a historic record of $10.3 billion, up 27% from the $8.1 billion raised in 2010, according to LAVCA. Of that, Brazil-dedicated funds captured the lion’s share of capital committed in 2011, bringing in $8.1 billion. The bulk of that went to funds raised by local firms Gávea Investimentos, Vinci Partners, BTG Pactual and Patria Investimentos.
Both Latin American and international investors told surveyors they believe the consumer goods and retail sectors offer attractive investment opportunities for GPs in Latin America over the next three years. However, there were variations in the views of international and domestic LPs on some other sectors. Cleantech and life sciences are roughly twice as popular with Latin American investors as with international LPs. Meanwhile, international investors are more enthusiastic about opportunities in the financial services and agribusiness sectors than Latin American LPs are.
Just over three quarters investors surveyed said they expect net annual returns of 16% or more from their Latin American PE funds (excluding Brazil), and two thirds (65%) expect the same returns from Brazilian PE funds.