- Hedge Funds
- Private Equity
- Forex
- Case Studies
- Agribusiness
- Renewable Energy
- Real Estate
- Technical Analysis
- Philanthropy
- Regulation
- Art
- Wine
- Commodities
- Emerging Markets
- Mining
- Ventures
Merlin Securities on Best Practices for Latin American Fund Managers
Over the past decade, several factors have converged to make Latin America one of the most exciting regions for hedge fund managers and investors. These factors include a large and growing population of high-net-worth and institutional investors, increasingly talented managers and an influx of foreign investors seeking geographic diversification.
The Latin American Trust
Project finance has been the solution for financing infrastructure needs across the world for many years now and Latin America has been no exception. The vast amount of debt and capital needed coupled with the risk involved in large-scale projects makes this technique one of the few alternatives available in the region.
Infrastructure Funds in Latin America
Countries in Latin America are expected to invest U$S D 450 billion in infrastructure assets between the years 2011 and 2015. These long-life assets are usually characterized by high development costs (design and construction) but low marginal costs of production and little to no competition once in operation. While the bulk of the investment is expected to be allocated to the surface transport and energy sectors, the water/sanitation and ports/logistics sectors are expected to see substantial increases in the current levels of investment.
All across the region, the public sector is often affected by budgetary constraints and lacks efficiency when it comes to building and operating infrastructure assets. That is why, with the help of loans and guarantees provided by governments and multilateral development banks, strategic and financial investors from the private sector are increasing their role in the provision of such public works and services. The private sector’s involvement is done through private finance initiatives, concessions and joint ventures.
LatAm Hedge Fund Outlook 2010
Alternative Latin Investor recently spoke with two high profile hedge fund players in Latin America, Otávio Vieira, Portfolio Manager at Safdié and Carlos Rojas Perla, Chief Investment Officer at Compass Group. We were privileged to hear how both managers felt markets had played out in 2009 and to learn of the themes they expect to dominate in 2010, as well as the strategies they were employing to best harness future returns.
Hedge Argentina
While the majority of hedge funds in the region have their operations located in the Brazilian cities of Sao Paulo or Rio de Janeiro, Argentina, despite the political and economic uncertainty that continues to affect the country, has attracted its share of funds as well. Almost all funds located in the country are headquartered in Buenos Aires, and use their base in Argentina as an advantage pertaining to investments in the country.
The Local Edge
In the real estate world the mantra is “position, position, position”. The same may be said for hedge funds based in Latin America. Proximity to the real action gives local managers an advantage over funds managed at a distance. We would not have said this in the mid-1990s when Latin America was an intense focus of investor interest in major financial centers and there was a proliferation of emerging markets mutual funds. It was perceived that the best perspective was achieved from a distance (on high?) looking towards the region from the northern hemisphere where one could observe matters without all the baggage that local investors and naysayers brought to the process.
Attracting Middle Eastern Investment
Cash needy investors are hitting the hedge fund industry hard and many managers are expecting significant redemptions, at least for the first half of 2009. In exclusive interviews with Alternative Latin Investor, Brazilian fund managers have spoken about their concerns about surviving the current worldwide economic downturn. Otavio Vieira of Safdie Private Banking expects to see a large contraction affecting Brazilian funds “Assets under management will drop a lot, in 2010 there will be perhaps only 30 to 40 percent of Assets under management when comparing with 2008 and this is causing many funds to close down”.
With investors pulling out of funds as they look to liquidate their assets, Latin American Hedge fund managers are actively seeking new sources for potential clients. In the pre-credit crunch days Latin America’s commodity rich nations were beginning to attract serious interest through BRIC and Agro funds. However, rather than waiting for commodities to rise again Latin American fund managers could find that looking eastwards is a source of customers that could bear fruit. Alternative Latin Investor has been speaking with several Fund managers based in the Middle East to find how their Latin counterparts can attract valuable new clients in the region.
