Throughout the past decade, alternative investments have gained traction in the market and secured their place in investors’ portfolios. In 2008, there were more than 3,500 institutional investors active in alternatives globally; in 2019, there are over 11,000. While the US and Western Europe remain popular centres of investment, investors have become more globalized, increasing their activity in emerging markets across Asia, Africa and Latin America (LatAm).
In the private equity space, 61% of investors surveyed by Preqin towards the end of last year planned to invest in emerging markets in some capacity over 2019, compared to 53% of fund managers. Investor appetite for private equity in emerging markets is growing; the difference between investors seeking solely developed markets (39%) compared to those mainly targeting developed markets but with some emerging market exposure (36%) is slight. It marks an evolving interest in emerging markets that some fund managers are taking advantage of, as seen by the 15% of fund managers planning to invest only in emerging markets this year.
This increased investor interest in emerging markets – with nearly two-thirds of investors surveyed including it in their current investment mandate – is good news for managers currently looking to raise funds to invest in Mexico. Currently, there are 50 private capital funds in market that are targeting Mexico for investment, 15 of which are being raised by international managers with no presence in the country. Among these funds, venture capital is by far the most common strategy, with 30 such funds currently raising, seeking just under $6.5bn in aggregate.
In addition to those funds specifically targeting Mexico, there are 103 private capital funds in market with a primary focus on the greater LatAm region. Together these funds are targeting a collective $17bn in capital, led by 20 infrastructure funds and 24 private equity funds seeking to raise an aggregate $6.2bn and $4.0bn respectively. Mexico appears an attractive target for these LatAm-focused vehicles, and a viable option for the previously mentioned majority of institutional investors looking to increase their exposure to emerging markets this year.
Looking forwards, 9% of private equity investors presently investing in LatAm aim to increase their allocations over the next five years. There is an even greater percentage of surveyed investors that, while not currently investing in LatAm, are looking to do so: 20% of such investors are considering LatAm investments.
As 46% of surveyed fund managers across alternatives expect emerging markets to present the best opportunities in 2023, the appetite for LatAm investments looks poised to grow in the coming years.
Industry experts share their views in a new report, Private Equity in Mexico. Produced in collaboration with AMEXCAP, a non-profit association focused on developing private equity in Mexico, this report takes an in-depth look at the current market in Mexico and investors’ plans for the future. Plus, there’s a special focus on investment opportunities in venture capital, real estate, infrastructure and more.