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Private equity in Latin America

by Kevin Neadley

  • 08 Mar 2011
  • PE

While many of the worlds advanced and developing economies are still recovering from the 2008 global financial crisis, Brazil's economy is reported to have rebounded faster than many others. Its GDP grew 7.5% during 2010, and it is currently the eighth-largest economy in the world. Recent growth is expected to be supplemented in coming years by the staging of the 2014 FIFA World Cup and the 2016 Olympics. This has created a significant amount of interest among domestic and foreign investors looking to benefit from Latin America's largest economy.

Aided by recent regulatory changes, Brazil's pension funds are now able to allocate a larger proportion of their capital to private equity; institutional investors in the country may therefore allocate more capital to the asset class. A number of overseas investors have expressed an interest in private equity opportunities in Brazil. Preqin's Investor Intelligence database currently tracks 400 LPs from around the globe that invested in Latin America, including Brazil, in the past through investments in funds targeting the region. The majority (56%) of these investors are based in the US and one-quarter (26%) are US pension funds, both public and private.

Private equity funds investing in Latin America have attracted some of the asset class' largest institutional investors. California Public Employees' Retirement System (CalPERS), Alaska Permanent Fund Corporation, Pennsylvania State Employees’ Retirement System, amongst others, were all named as investors in Advent Latin American Fund V, which closed in 2010 at USD 1.65 billion. A portion of the fund's committed capital is earmarked for investment in Brazil. Further, Southern Cross Group closed its fourth Latin America-focused fund last year, with committed capital totalling USD 1.68 billion. Corporación Mexicana de Inversiones de Capital, Washington State Investment Board, and UK-based FF&P Asset Management are all investors in the fund.

In terms of types of institutions investing in the region, more public pension funds are known to have gained exposure to Latin America than any other investor type, accounting for 34% of all 400 LPs. Private equity fund of funds managers make up 10% of these investors and 10% are foundations.

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