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Nascent Private Equity Market in Mexico Catching Up – April 2014

by Luke Goldsmith

  • 22 Apr 2014
  • PE

As an emerging market, Mexico is still far behind its contemporaries such as Brazil and China, but it is starting to play catch up. Preqin’s Funds in Market online service shows that there are 28 funds currently raising capital aimed at investment in Mexico as part of a wider geographic focus. These funds are looking to gather just over $7bn in total capital commitments. This compares to 21 funds in market at the same time last year, which were targeting an aggregate amount of $4bn. As Mexico aims to become more politically and economically stable while also reducing its reliability on the US, investors are beginning to pour their capital into the country. 

At the turn of the century it was evident that LPs were already beginning to turn to Mexico for private equity investment. However, along with the majority of the world’s economies, Mexico was negatively affected by the financial crisis. Before the crisis struck, the record for funds focused solely on Mexico was in 2007, when four funds raised over $1.5bn. Such levels were not seen again until 2012, five years later, when over $1.6bn in capital was garnered. 

The private equity industry in Mexico was given a major boost in 2009 when the government gave Mexico-based pension funds the ability to invest up to 10% of their assets in private equity funds. This key reform may help the country going forward as pension funds are traditionally a significant investor type that contribute substantial amounts to the private equity industry. 

With Mexico’s financial markets becoming more stable over recent years it is no surprise to see financial services as one of the most popular markets for deals in the country, excluding real estate and infrastructure. According to Preqin’s Buyout Deals Analyst and Venture Deals Analyst, there have been 12 private equity-backed buyout and venture capital investments into the industry since 2006 and 2007 respectively, though the Internet sector is the industry that has seen the most investments of all in Mexico (23) in the same time periods. 

The largest fund currently raising capital targeting Mexico as a part of a wider geographic investment focus is Macquarie Infrastructure Partners III. The fund is aiming to earn direct and indirect income through infrastructure assets and infrastructure-related businesses. In January 2014, it reached a second close of $1.9bn, nearing its target of $2bn. For funds focused solely on Mexico, the Lion Mexico Fund is the largest fund ever raised in terms of final close size. The real estate fund gathered $651mn in 2007, targeting investment opportunities in industrial, retail and apartment properties.

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