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Private Equity

Jeronimo Bosch of Grupo Pegasus

Strong Investment Opportunities In Spite of the Global Recoil from Argentina

Since the resurgence of the PE market in LatAm last decade, Brazil has been by far the most attractive market in the region for foreign investors; recently, the Andean region and Mexico have become the consensus picks as the most promising markets in the near term.  During that same period, howver, and especially since the government takeover of YPF last year, Argentina has been spurned by the global investment community ...

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Erik Peterson of the Abraaj Group

The Strength of Mexico and the Andean Region

In 2012, the Abraaj Group, a Dubai-based PE fund manager founded by Arif Naqvi, acquired Aureos Capital, creating one of the largest growth market PE investment firms in the world, with over US$7 billion AUM.  The acquisition helped bring Abraaj into LatAm, where Aureos already managed a portfolio of regional assets ...

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Timothy Cunningham of Touchstone Group

What Global Institutions are Looking for in LatAm Managers

As the LatAm private equity market grows and matures, it is vying increasingly for global institutional capital. These institutions are attracted to LatAm in large part because of the growth prospects in certain regions and sectors, but more importantly, they see a growing crop of managers with enough track record to prove their long-term viability ...

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Duncan Littlejohn of Paul Capital

The Growing Secondary PE Market in LatAm and What It Means for Investors and Managers in the Region

As the LatAm PE market matures and funds reach their allocation goals, a secondary market is slowly emerging. Global firms that specialize in buying PE on secondary markets are already buying portfolios with LatAm assets, resulting in interesting early exit opportunities for fund managers and new ways for global investors to gain exposure to the region ...

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Chris Bruneau of 57 Stars

The Role of Funds of Funds as Institutional Investors Enter Emerging Markets

As the developed markets continue to sputter and emerging private equity markets mature, institutional investors are gradually shifting their allocations toward emerging market managers. As they do so, many are utilizing emerging market funds of funds as a way of gaining broad and diverse exposure via experienced fund selectors ...

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No Slowing Down

Felipe Iragorri of Tribeca Asset Management Sees Continued Room for Growth in Colombian PE

Over the last half decade, a convergence of propitious factors has turned the Colombian PE market from an underdeveloped latecomer into one of the most attractive markets in LatAm. With only 4 local funds in existence before the landmark regulatory reforms of 2007, over 20 funds were raised in the next 3 years — and the country's attractiveness has only grown since ...

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Private Equity in LatAm Infrastucture Development

An interview with Teseo Bergoglio, Co-Owner and Co-Managing Partner - Latin American Partners

LAP Latin American Partners (LAP) is a fund manager with a team of investment professionals that after working together for many years in private equity in Latin America, decided to focus on a sub-region of Latin America and to specialize in mezzanine, which we believe to be more suitable than pure equity for many of our target companies. That is the genesis of the Central American Mezzanine Infrastructure Fund (CAMIF) ...

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The Private Equity Landscape

In Colombia

A decade ago, Colombia was struggling with political and social instability, a weak economy and widespread violence. With foreign direct investment (FDI) hovering around US$2 billion from 1999 until 2003, it was clear that the international financial community was not looking at the country as a favorable place in which to invest capital. However, with the election of President Álvaro Uribe in 2002, Colombia began to resolve the issues of violence ...

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Private Equity in Brazil

The Music Hasn't Stopped

According to data provided by the Emerging Markets Private Equity Association (EMPEA), Brazil's PE industry in 2011 raised a record US$7.1 billion, or 18% of the new capital committed to emerging markets. Of this total, it invested US$2.5 billion across 47 companies. More than half the deals were in the energy, infrastructure and consumer sectors. This comes as no surprise, as Brazil has the largest consumer market in Latin America ...

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Exporting LatAm Style

Etiqueta Negra and OndadeMar Expand Abroad

It is no secret that the major trend fueling the LatAm retail sector is the growth of the region’s consumer classes. But while much attention has been paid to brands and retailers serving the middle-income population, some investors are turning to high-end luxury brands. These brands cater to upper-income buyers as well the “aspirational” element of the middle segment, and some have the potential to take the leap abroad. Two prime examples of this trend are Etiqueta Negra ...

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Fostering the Future

Montessori Education in LatAm

Montessori education is a widespread and well-known method for teaching young children. Developed by the Italian doctor-cum-pedagogy theorist Maria Montessori in the early 20th century, it spread from Italy to most corners of the globe over the next 100 years, becoming particularly popular in the US as one of the most successful alternative education models of recent decades. Designed to foster autonomy, creativity and spontaneity, among other characteristics often lacking in traditional school settings, Montessori education has garnered attention not only from progressive-minded parents ...

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Education and Democracy

An Interview with Susan Segal, Chair of the Americas Society

There’s no place, in my opinion, where there isn’t room to make huge advances in education. It starts with early childhood, making early childhood education more accessible. Children who can’t afford to go to school are disadvantaged from the get-go; it also prohibits or makes it difficult for mothers to get jobs. Elementary school and K-12 are also critical investments - inspiring kids to want to go to school, getting them there, the quality of schools, teaching teachers how to teach, getting computers into students’ hands and inspiring them to study math and science ...

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Private Equity Investment

Education in Mexico

The previous issue of ALI highlighted investment opportunities and developments in Mexico, showing how, in spite of its strong ties to a sluggish US economy, Mexico’s macro indicators continue to be strong and bolster alternative asset classes across the board. A large and predominantly young population – more than100 million people with an average age under 25 – with increasing purchasing power has fueled this growth, while regulatory reforms have helped free up capital for investments ...

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Education PE

In LatAm : 101

Private equity investment is on the rise in LatAm, with global fund managers attracted to the region’s generally low prices, strong macro fundamentals and increasingly business friendly regulatory environments. One of the big stories in the region has been the expanding middle class, which, in countries such as Brazil, Mexico, Peru and Colombia, is steadily growing in both number and purchasing power. Many PE funds have been tapping those demographics ...

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You Say You Want a Revolution

E-Learning Arrives in LatAm

Public awareness of the profound changes happening in the realm of e-learning has reached a tipping point. The recent announcement that Stanford University and the Massachusetts Institute of Technology would offer free courses online to anyone in the world, for instance, set off a flurry of commentary in the mainstream media regarding the paradigm shift we’re living through. That shift, though initiated largely in the US over the last decade ...

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Private Equity

In Latin America K-12 Schools

The world has long recognized the increasing complexity of a global economy, with the interdependency of different economies and the long presence of multinational companies. We also learn to appreciate various cultures and always seek to learn about the many ethnic, government, religious and even culinary differences present around the world. The education sector and K-12 schools in particular have similarly embraced the success of international schools ...

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Finding the Next Great Thinkers

Bloomberg Hits a Home Run with the BAT

As financial sector recruiters have looked increasingly to foreign markets for fresh talent in recent years, they have faced two basic challenges.  First are the logistical challenges of merely discovering such talent from far-flung places, including many emerging markets, on limited budgets. Second is evaluating that global mix of potential employees in such a way that the truly talented, regardless of the particulars of their culture, mother tongue or college-level education, rise to the top ...

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The World of Austral

Parque Austral and the IAE Business School Forge the 'Silicon Valley of Argentina'

On a gorgeous, pastoral campus on the fringes of Pilar, Argentina, about a half-hour’s drive from downtown Buenos Aires, a collaborative project led by a world-class real estate investor and developer and sponsored by one of the finest private universities on the continent is forging a cutting-edge center for LatAm-based businesses, tech developers and entrepreneurs ...

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International Schools in LatAm

ALI speaks with Paige Geiger of the American School of Sao Paulo

As LatAm has become, in the eyes of many, a land of opportunity, its international population has grown. The new wave of European, American and Asian professionals emigrating to LatAm has led to a rising demand for K-12 schools that meet the standards of schools back home. Demand has also increased among LatAm families and students looking for K-12 education that meets global standards and prepares them, in some cases, to attend university abroad or, at least, enter a predominately Anglophone, Westernized job market ...

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The Virtues of Focus

A Profile of Graycliff Partners in LatAm

Usually, private equity shuns the spotlight. Right now, executives in Europe or the U.S. will do almost anything to avoid having to put their heads above the parapet to justify debt-heavy buyouts that have failed to deliver on juicy IRRs, even juicier incomes that are generously taxed as capital gains, and the prospect of job layoffs for workers in the search for efficiency gains ...

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CKDs

The Marriage of Wealth and Growth

Mexican pension funds, or afores, have over US$130 billion under management, about 11% of the country’s GDP.  Yet until recently, they were legally prohibited from investing in private equity.  The restriction restrained the growth of Mexico’s PE market: according to LAVCA, private equity flows were only 0.05% of GDP in Mexico in 2006, compared to 0.08% in the rest of LatAm and 3.96% in the U.S.  Mexico was missing out on the trend among LatAm’s fastest-growing markets ...

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Private Equity in Mexico

Capitalizing on the Growing Middle Class

One of the most important stories in LatAm in recent years for private equity (PE) investors has been the growth of the region’s middle class in terms of population and purchasing power.  Exposure to consumer goods manufacturing and retail has been one of the best ways to gain exposure to the region’s hottest economies, beyond the commodities exposure one tends to find on international exchanges.  The same is true in the case of Mexico, and perhaps even more so, as middle-class consumer demand-related sectors ...

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Private Equity in Family Office Allocation

ALI Speaks with Christina Kappaz of Cimarron Capital Management

Christina Kappaz brings a unique perspective to bear on private equity (PE) and venture capital (VC) investment in Latin America. She is an associate at Cimarron Capital Partners, a firm that has managed regional funds of funds in such U.S. states as Iowa, Oklahoma and Arkansas for close to two decades, helping them develop fund-focused and market-driven approaches to investment. While the firm worked in these essentially emerging market spaces in the U.S., its managers and directors were active in industry-building activities and were among the early members of the ILPA and, through an affiliate firm, helped launch the Latin American Venture Capital Association (LAVCA)  ...

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A Primer on Colombian Taxes

For the PE Investor

Colombia’s taxation offers some "hidden" surprises for small and mid cap PE investors. The DIAN (Colombian IRS equivalent) and other local taxing authorities have created some rules that complicate the lives of investors unnecessarily. However, with a well-managed strategy, companies can minimize the impact. Here is a primer, but by no means an exhaustive explanation, of what to expect. Multiple relatively independent taxing authorities: In addition to the DIAN, your business in Colombia will be subject to a number of other local taxes. Perhaps the best example would be the states’ franchise tax ...

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Investing in Latin America

Access Local Knowledge

Private Equity investing is usually limited by the firm’s ability to protect its capital.  In the Latin America of today a good PE investor can find opportunities to make high returns with relatively lower risk than 10 to 20 years ago.   This is mainly due to the newfound stability in countries like Peru, Colombia, Chile, and Brazil.  This high return/low risk can only be accomplished by managing risks.  Finding the right local adviser is therefore key unless someone on your team is intimately familiar with the methods and structures for doing business in that particular country.  If there’s a hedge in cross-border Private Equity it is precisely in finding the right local partners ...

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Going Small

Brazilian Private Equity Investment

As foreign investors have flooded the Brazilian market in recent years, much of their capital has gone toward select blue-chip companies with international reputations, leading to increases in competition, prices, and multiples.  “There is some overcrowding at the high end of the market, where there are fewer companies,” said Duncan Littlejohn, the Latin American representative at Paul Capital, a global alternative investment firm.  “Traditionally you´ve had a handful of players and managers that have been active in that space, and now they are being joined by a number of U.S. and European private equity managers that have come in for big deals.” ...

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LatAm Private Equity

The Secondary Market

In the coming years, a strong secondary market will emerge in LatAm – and particularly Brazil – for funds launched toward the middle or end of last decade, offering foreign and local LPs new investment and exit opportunities. According to Duncan Littlejohn, the Latin American representative at Paul Capital, a global alternative investment firm that includes a US$1.6 billion fund for secondary assets in emerging markets, the LatAm secondary market is only in its infancy.  “If you think of the inventory of existing LatAm funds,” he says, “the bulk of them were raised 2007 onwards, so most of the funds aren´t yet five years old ...

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The Brazilian Bubble Argument

Full of hot air?

In the midst of the Brazilian economy´s continuing surge – it grew 7.5% in 2010, its highest rate of growth in twenty-five years, and is forecast to grow another 4% this year – some skeptics have emerged warning of an overheating system and a swelling bubble poised to burst.  They are particularly concerned with the soaring real estate prices in São Paulo and Rio de Janeiro and a booming middle-income housing market fueled by unprecedented levels of consumer credit being dispensed to the enormous and growing middle class.   Paul Marshall, the CEO of Marshall Wace ...

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Private Equity : Brazil

Investing in the Consumer Market

 One of the major stories of the Brazilian boom is the growth of its domestic consumer market fueled by a swelling middle class with rising purchasing power.  This middle class, or Class C (according the official class stratification scheme), with family incomes between US$750 and US$3,229 a month, has grown by almost 40 million since 2003, and now includes about 105 million people, or half the Brazilian population, accounting for nearly half of the country´s total purchasing power.  Class AB (the upper-middle and upper classes) has also grown in the last decade.  All classes of the population are spending more … 

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Facing Challenges of Brazilian Private Equity: Part II

Tips on successful private equity investing in Brazil

 This is perhaps the mother of all issues when considering the more common challenges in successfully raising private equity capital. And it’s not an issue solely relevant to Brazil and/or Latin America, as it is an issue facing any early-stage or middle-market company worldwide looking to raise capital via the private equity market. It is the subject of much frustration among private equity professionals and company executives alike, and perhaps the single most common reason why most potential transactions reach an unfortunate and untimely death. Let’s first remember that a principal factor of the current financial crisis was … 

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Steady in the storm with regional opportunites

Private Equity Investment in Central America

 After a decade of steady growth Central America is weathering the global financial downturn comparatively well and continues to offer regional opportunities for private equity. Historically, this small, diversified region has suffered from armed conflict, political instability, weak institutions and a lack of legal frameworks and enforcement. However, stable democratic governments allied with disciplined fiscal policies brought an unprecedented period of growth in the past decade with steady growth rates on average above 5%. According to IMF figures from 2006 Central America with 5.5% Real GDP growth was second only to Latin America … 

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Challenges for Successful Private Equity Investments in Brazil

Brazilian Private Equity Investment

 Brazil is quickly becoming a political and economic leader in Latin America and the world. As with the rest of the global economy, Brazil entered into a recessionary period in 2009, but economic data that have been emerging from the Instituto Brasileiro de Geografia e Estatística (“IBGE”) increasingly point to a stabilization in the economy, further suggesting that the country has perhaps been less impacted than other markets in this global recession. After the 4.4% quarter-on-quarter decline in 4Q08 and a subsequent 3.5% decline in 1Q09, the country’s GDP reached US$417.8 billion at 2Q09, up 5.2% … 

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