The Growing Importance of Central and South America-Based LPs in Private Equity – March 2015

by Scott Gibbs

  • 04 Mar 2015
  • PE

LPs located in Central and South America are becoming increasingly prominent investors for private equity firms looking to raise capital due to the loosening of regulation in parts of the region. Preqin’s Investor Intelligence online service currently tracks 95 LPs located in Central and South America, of which 22 are looking to invest in the asset class over the next 12 months. However, as a result of certain regulations in these countries (as discussed in a previous blog), many will be investing in predominately domestic opportunities. Of the 95 Central and South America-based LPs that Preqin currently tracks, 80% have invested in or shown a preference for South America-focused opportunities. In terms of investing outside the region, 17% of Central and South America-based LPs will seek exposure on a global scale; 16% display an appetite for North America, 12% for Europe and 11% for Asia.

Looking at historical allocation figures for investors in the region further emphasizes the growing interest in private equity from investors in Central and South America. A clear trend is visible from 2013; the average current allocation to private equity has risen from 3.4% of total assets to 5.3%. Alongside this, target allocations have also risen: a 66% increase can be seen from 2013 to 2015, resulting in an average target allocation of 8.3% of total assets this year. It is also interesting to note that pension funds have both higher current and target allocations than the region average, at 5.8% and 8.9% respectively. These increases may seem small, but taking into account that the average total assets for an investor based in the region is $25.6bn, they represent large amounts of capital.

Twenty-six percent of investors based in the region will consider investing in first-time funds, a reassuring sign for fund managers looking to access the growing levels of available capital. Alongside this, 24% are considering targeting co-investment opportunities and 6% show an interest in awarding separate account mandates. Both of these figures are currently below the average for investors in the asset class as a whole, though it will be interesting to see how these figures change in the near future, as investors from Central and South America become more sophisticated and gain further experience in the asset class.

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