Private Equity Investor Appetite for South America – September 2014

by Lauren Mason

  • 24 Sep 2014
  • PE

South America has long been considered one of the most prominent regions in emerging markets, and the strong investor appetite is proof of interest in the area. In a study carried out by Preqin at the end of 2013, it was found that 38% of LPs viewed South America to be the region presenting the best opportunities within emerging markets. In a similar mid-year study carried out in 2014, the percentage of LPs that viewed South America as presenting the best opportunities fell to 21%, but this still ranked the region third overall, behind Asia and China, indicating that its standing within the emerging markets has not diminished. 

Of the LPs that currently have an appetite for South America-focused vehicles, pension funds are the dominant investor types with 30% expressing interest in the region, as shown in the chart above. Fund of funds managers make up 14% of investors with a preference for the region followed by endowment plans (7%), asset managers (7%) and government agencies (6%). This widespread distribution of investor types shows just how varied the interest in South America is, and how investments in the region can be useful for a wide range of LPs with differing investment aims. Geographically, North America-based investors demonstrate the highest preference (49%) for South America-focused funds, with Europe-based investors following with 24% and South America-based investors next at 14%. 

An example of a recent South America-based fund investment is that of State of Wisconsin Investment Board, which committed $50mn to Pátria Brazilian Private Equity Fund V. This buyout fund will focus on investments in the consumer products and services and healthcare and education sectors throughout Brazil. Approximately 25% of the capital in the fund can be directed to investments in other countries in the region. 

Preqin’s Investor Intelligence currently tracks over 5,300 LPs, of which 14% have previously invested in a South America-focused fund. This is a significant figure and indicates that South America, when viewed among the emerging markets - let alone the rest of the global market - is a region that cannot be overlooked. Nearly a quarter (23%) of LPs looking to make new commitments to private equity in the next 12 months are targeting opportunities in emerging markets, showing that a significant proportion of LPs are looking to invest outside of their domestic markets. This only further indicates that investor appetite for South America will remain steadfast as one of the prominent regions in emerging markets, a region that is certainly one to watch.

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