Hedge Fund Investors with Current Exposure to Central and South America – November 2014

by Michael Brown

  • 24 Nov 2014
  • HF

Preqin’s Hedge Fund Investor Profiles tracks 147 institutional investors with current exposure to Central and South America. Recent years of rapid economic growth in Central and South America have been replaced by renewed political uncertainty; the sovereign debt crisis in Argentina and a general slowdown in economic growth across the region have resulted in unpredictability and higher volatility of markets. Despite this, global investors of various types are seeking opportunities in the region to take advantage of potential growth prospects. 

Funds of hedge funds make up 29% of the group, followed by foundations, which account for 20%. Private and public pension funds across the globe also have exposure to the region, accounting for 16% and 7% respectively. Fourteen percent of private wealth firms (family offices and wealth managers) have indicated that they currently invest in Central and South America. Moreover, data shows that asset managers (5%) and endowments (4%) also have an appetite for the region. 

Geographically, US-based investors lead the way in exposure to Central and South America through their current hedge fund allocations, accounting for 56% of investors worldwide. Brazilian investors make up the second largest group, accounting for 15% of investors with an appetite for Central and South America. Europe-based investors (excluding Switzerland and the UK) account for 19% of all investors investing in Central and South America, with a further 6% based in the Asia-Pacific region. 

One example of an investor gaining exposure to Central and South America through hedge funds is the New Mexico Educational Retirement Board (NMERB). The pension fund allocates approximately 24.7% of its $11.3bn assets under management to the asset class through around 18 hedge funds that provide it with exposure to a wide range of strategies. The pension fund recently allocated capital to the Gramercy Argentina Opportunity Fund, which seeks to generate returns by investing in Argentine sovereign debt. 

Investors with exposure to Central and South America hail from all parts of the world and account for a variety of investor types. These investors tend to be closer to home in the US and Brazil, though significant European interest also exists. Current hedge fund exposure to the region comes from large, sophisticated institutional investors, such as funds of hedge funds and pension funds. With nearly 150 known hedge fund investors with exposure to Central and South America, managers offering exposure to the region could benefit greatly from the degree of interest shown.  

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