Investor Appetite for South America – July 2013

by Joanna Nye

  • 30 Jul 2013
  • PE

As investors’ awareness of investment opportunities within emerging markets continues to grow, increasing numbers are looking to invest in these regions. A study carried out by Preqin at the end of 2011 found that 23% of LPs viewed South America to be the region presenting the best opportunities within emerging markets. This figure has since grown, with a similar study carried out at the end of 2012 highlighting that 27% of LPs saw the region to be presenting the best investment opportunities. In 2013, this figure has shown a significant increase, with 38% of LPs asked the same question in a mid-year study stating that they view South America to be presenting good opportunities, an increase of 11 percentage points.

Following an increase in LP appetite for South America, a number of LPs have made to commitments to these vehicles so far in 2013. DGF Capital 3, a growth fund targeting investment opportunities in Brazil is approaching its first close and has already received a number of commitments. These include a commitment from Brazilian government agency, FINEP, and a commitment of $66mn from US-based government agency, Overseas Private Investment Corporation. Overseas Private Investment Corporation has also made a commitment of $125mn to South America-focused growth fund TPG Alternative & Renewable Technologies Partners. Other LPs that have recently made commitments to South America-focused private equity funds include Alaska Permanent Fund Corporation, which made a commitment to Carlyle International Energy Partners I, a natural resources vehicle, and Belgium Federal Holding Company, which made a commitment to Brazil-focused venture vehicle, Fundo Performa-Key de Inovação e Meio Ambiente.

Preqin’s Investor Intelligence currently tracks over 5,100 active investors in private equity funds, 12.9% of which have previously invested in funds targeting investment opportunities in South America. Of the investors that currently have an appetite for investing in the region (8.3%), the majority (49.7%) are US-based investors. Investors based in Europe make up 23.3%, Asia-based investors account for 4.9%, and LPs based in regions outside of North America, Europe and Asia represent 22.1% of LPs with an appetite for South America.

Eighteen percent of LPs tracked by Preqin are actively looking to make new fund commitments over the next 12 months, over a quarter of which (28.6%) will look to target funds focusing on investment opportunities in emerging markets during this period. With a significant proportion of LPs looking to make commitments to funds focusing on investment opportunities in emerging markets going forward, it can be seen that investors are continuing to invest outside of their own domestic markets, and seeking out funds in the regions which they believe to be presenting the best opportunities in the current financial climate.

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