By Shanny Basar
eFinancial News

March 23, 2012 – Cate Ambrose, president and executive director of the Latin American Private Equity & Venture Capital Association, is confident about long-term trends after two years of record fundraising for the region.

This week Lavca said in a report that private equity and venture capital firms investing in Latin America raised a record $10.3bn in 2011, overtaking the previous high of $8.1bn set the year before.

FN: After two record years of fundraising, do you see this as a long-term trend for the region?

Ambrose: After two-mega funds were raised in 2010, I did not see where more money was going to come from in 2011 and there are still not that Latin American funds that can raise more than $1bn. I could be proved wrong again but even if 2012 sees a dip in fundraising it will be part of long-term cycle of growth for the private equity industry in the region.

FN: Are local pension funds increasing allocations to private equity?

Ambrose: They are clearly interested in investing but are waiting for a track record to develop and are arduous in doing due diligence. For example, in Colombia they are waiting to see the results of investments they made four to five years ago before deciding whether to increase allocations. There is a need for more funds that are between $100m to $400m in size, which will take many years to develop, but the pool of investors for alternative assets is deepening over time. There is a long-term trend of pension funds wanting to put money with alternative managers around the globe but it is still relatively early days.

FN: Your report showed a growing interest in investing outside Brazil. Do you expect this to continue?

Ambrose: We have seen the trend increase since 2010 and there may be a perception that other countries are less crowded than Brazil and offer lower valuations. It is too early to tell but I expect that a lot of the new funds raised by Brazilian private equity firms will be used outside the country.

FN: The volume of Brazilian initial public offerings has dropped so will a more difficult exit environment make private equity less attractive ?

Ambrose: The IPO market was challenging last year but that is due to global volatility which did not just affect Brazil and there were some high-profile listings last year. However many multinationals want to expand in the region and are willing to pay very attractive prices.

FN: Are there any other important trends?

Ambrose: The major trend is US venture capital firms going into Latin America which we had not seen until the last two years and Lavca will be spending more time and effort on tracking early stage investments. I spent last week in Brazil with Silicon Valley Bank visiting venture capital firms and it is really dynamic with many young people choosing start-ups rather than a job with the government or a big firm.