By Sam Sutton
Private Equity International

March 21, 2012 – Private equity and venture capital firms raised $10.3 billion in 2011, beating the previous year’s record of $8.1 billion, according to statistics released by the Latin American Private Equity and Venture Capital Association.

However, despite annihilating 2010’s peak by more than 27 percent, Latin American fundraising was remarkably top-heavy in 2011.

Most of the region’s fundraising effort took place in Brazil, where country-focused funds accounted for $8.1 billion of the total amount raised. Five of the funds raised by Brazilian firms last year – Vinci Partners, Gavea Investimentos, BTG Pactual and a pair of vehicles from Patria Investimentos – combined to notch $7.3 billion.

The strength of Brazil’s local players was magnified by the growth of the country’s limited partners, including pensions that have developed an appetite for alternative asset classes in recent years. However, the country’s pension system remains limited to investing in domestic vehicles.

International investors have also flocked to the region, drawn by the allure of robust GDP growth, an expanding middle class and stable economic fundamentals.

Local firms were not the only dominant forces. The Carlyle Group managed to raise $776 million for its pan-South American fund. That fund comprised 70.5 percent of the total raised by pan-regional funds on the year.

Although pan-regional vehicles accounted for only 21.4 percent of the capital raised in Latin America, LAVCA’s statistics for the deal-making environment may hint at swelling interest in non-Brazilian investments. Brazil still captured the greatest percentage of deals completed at 50 percent, but Peru, Colombia and Argentina all saw increases relative to their 2010 totals.

The largest boom in deal making occurred in Mexico, where firms completed 21 deals at a value of $456 million – a 117 percent increase over the volume of capital invested in companies the previous year.

Brazilian firms are taking notice, said LAVCA executive director Cate Ambrose in a statement.

“Some of the large Brazilian firms are also expanding into Colombia, Chile, Peru or Mexico, a positive development for the growth of the private equity industry throughout Latin America,” she said.

Perhaps the most notable expansion is Brazilian BTG Pactual’s $600 million acquisition of investment bank Celfin, which will broaden the firm’s reach into Peru, Chile and Colombia. Celfin’s private equity business, though small, is an important asset for BTG as it provides access into other, underpenetrated Latin American markets. Celfin has significant experience sourcing capital from Latin American pension systems for international firms.