LAVCA spoke with Martín E. Díaz Plata and Guilherme Lins, Managing Partners at Capital International, about their new global emerging markets fund and the private equity environment in Latin America.
LAVCA: Please give us some background on Capital International.
Díaz: Capital International, Inc. (CII) is an institutional investment manager and one of The Capital Group Companies, which is privately owned by its employees. CII has nearly 25 years of emerging markets investment experience. Investment management is the only business of the Capital organization. Founded in 1931, the Capital organization is one of the world’s largest investment management firms.
CIPEF is the dedicated emerging markets private equity business of Capital International, Inc. CIPEF has more than 20 years of private equity experience focused solely on the emerging markets and has invested $3.2bln across 35 countries.
LAVCA: Capital International recently closed its sixth emerging markets fund at US$3bln. What can you tell us the fund and your fundraising experience?
Lins: CIPEF VI is optimally sized to allow investment in the current generation of compelling emerging market investment opportunities in local, leading companies and franchises. CIPEF VI is the largest global emerging market fund raised in the last 5 years.
We have one of the most consistent track records and experienced teams in the industry. We think that both of these factors were the keys for our successful fundraising. Making investments in emerging markets require a distinct approach in every country and therefore, we have assembled over the last 20 years a team of investment professionals that not only are deeply knowledgeable about their coverage countries but also possess a global approach to investing which allows them to assess and compare investment opportunities across the emerging market universe.
LAVCA: Martín, you are a veteran PE investor in Latin America, with experience dating back almost 20 years. How do you view the environment for PE investors today as compared to 10 or 15 years ago?
Díaz: It is a more mature industry, both in terms of firms and professionals. There is more competition but there are also more opportunities and better awareness of private equity as an asset class and as a long term financing tool.
However, the region is still inherently volatile due to changing fiscal conditions, commodity prices, and an evolving political landscape. In other words, the macro environment is not a permanent upward trend. Therefore, our ability as a global emerging market fund to be selective and patient on finding the best investment opportunities (which could mean not investing for a long period of time) becomes an advantage.
LAVCA: Has your investment criteria changed at all due to current market conditions?
Lins: Our strategy of investing in leading franchises around the emerging market world continues to dominate our philosophy. These companies tend to have great management, more sound business plans, and better exit visibility.
LAVCA: When compared to other emerging markets, what is Latin America’s advantage?
Díaz: The rise in entrepreneurialism and accelerated consumer power, coupled with the structural reforms and fiscal discipline implemented in most Latin American countries in recent years, have created a favorable environment for CIPEF’s investments. However, we think that this is a theme that is also valid for other emerging economies.
LAVCA: What is your strategy for investing in Latin America, say over the next 5-10 years?
Díaz: Find great companies with great management that need a partner like CIPEF to develop their business. As a global fund, we have the mandate and ability to be patient to slow down or accelerate our investment activity in a specific country or region until we find these companies.
For more information on Capital International’s recent activity, please view the following: