Caitlin Mitchell, LAVCA
Institutional Investors Forecasting Strong Returns From Their Latin American Private Equity Investments
- Over 60% of private equity investors (LPs) based in Latin America plan to increase their target allocations to the asset class
- Over half of investors perceive Mexico and Colombia as having a very attractive risk/return profile
- Investors are continuing to recruit for their Latin American teams
Almost two-thirds of investors in Latin America private equity are forecasting annual net returns of over 16% in the next 3-5 years, according to the annual Coller Capital/LAVCA Latin American Private Equity Survey. This compares with just 23% of investors that expect this level of return from their global private equity portfolios (according to Coller Capital’s Global Private Equity Barometer).
For Latin American private equity investments outside Brazil, investors’ outlook is even more positive, with three quarters of them expecting net returns of over 16%. In terms of individual countries, Limited Partners (LPs) are most optimistic of all about returns from Colombia and Mexico, closely followed by Peru.
The pace of new commitments to Latin American private equity will remain strong in the coming year, with 78% of LPs maintaining or accelerating their commitments to the region.
More Latin America-based investors plan to increase than to reduce their target allocations to alternative assets (private equity, real estate and hedge funds) – and private equity receives the strongest vote of confidence, with 61% of Latin America-based LPs planning to increase their allocations to the asset class in the coming year. These plans are reflected in LPs’ hiring intentions; nearly half of investors will recruit new staff for their Latin America-focused private equity teams in the next 12-18 months. (Almost no investors expect to reduce the size of their teams.)
The risk-reward equation for Latin American private equity as a whole is also improving, according to a majority of LPs. On the other hand, the risk-reward equation for Brazil specifically is seen as worsening, with almost twice as many LPs (42%) seeing a deterioration, compared with the 23% who believe the country’s risk-reward equation is getting better. (Interestingly, international investors are somewhat more optimistic about Brazil than their Latin American counterparts.)
Coller Capital’s CIO Jeremy Coller commented: “Investors are signalling continued growth for private equity in Latin America. Their positive outlook is reflected in the attractive returns they expect, both from the region as a whole and especially from the less developed private equity markets of Colombia, Mexico and Peru.”
LAVCA President Cate Ambrose said: “The private equity and venture capital community in Latin America has become increasingly sophisticated in recent years. Not only are international investors growing their Latin America teams, but local investors are increasing their allocations to alternatives creating a dynamic environment for fundraising and investing.”
Both Latin American and international investors expect trade sales to become even more dominant as an exit route in the next couple of years. They think the second most common exit route will be secondary buyouts – followed in third place by IPOs. All these exit routes are expected to become somewhat more common.
Additional Survey findings:
The 2014 edition of the Survey also charts investors’ views and opinions on:
- Individual aspects of the Latin America market compared with other emerging markets
- Opportunities and challenges for Latin American private equity
- Attractive sectors for private equity investment
- Direct investing and co-investing by LPs
- Influence of ESG factors on LP investment decisions
- LPs (Limited Partners) are investors in private equity funds
- GPs (General Partners) are private equity fund managers
- Private Equity (PE) is used as a generic term covering venture capital, growth capital, buyout, and mezzanine investments.
- ‘International’ investors in this survey are defined as LPs headquartered outside Latin America.
- Coller Capital and LAVCA’s Latin American Private Equity Survey is a unique snapshot of trends in Latin American private equity – an annual overview of the plans and opinions of institutional investors in private equity funds. These investors, based in Latin America, North America, Europe and Asia-Pacific, form a representative sample of LPs investing in Latin American private equity .
- This Survey captured the views of 131 private equity investors from around the world in June-July 2014. The Survey’s findings are globally representative of the LP population by: investor location; type of investing organisation; total assets under management; and length of experience of private equity investing.
For further information on the Coller Capital/LAVCA Latin American Private Equity Survey – 2014, please contact any of the following:
+1 (646) 315 6737
LAVCA, New York
+49 694 089 8020
Notes to Editors
About Coller Capital
Founded in 1990, Coller is headquartered in London, with additional offices in New York and Hong Kong. The firm’s multinational investment team – the world’s largest dedicated to secondaries – has a truly global reach.
Coller Capital invests across the size range of secondaries transactions: from single LP positions in small private equity funds, to large portfolios of diverse assets; from investments as small as $1 million, to transactions of $1 billion or more.
In 2012, the firm closed its sixth fund, Coller International Partners VI, with capital commitments of $5.5 billion and backing from almost 200 of the world’s leading institutional investors.
Coller’s name is synonymous with the development of the secondaries market. In 1994, the firm launched Europe’s first secondaries fund; then in 1998 closed the first such fund with a global mandate. In 2000, the firm acquired NatWest’s $1 billion private equity portfolio from the Royal Bank of Scotland – the largest secondaries investment of its time – then repeated the feat in 2004, when its purchase from Abbey National became the largest unsyndicated secondaries investment of its time.
Investments in the last few years have included: transactions with the quoted private equity businesses SVG Capital and 3i; the acquisition of two $350m+ portfolios from Crédit Agricole; the purchase of a $1.9bn PE portfolio from Lloyds Banking Group; the creation of a $400m fund to acquire direct assets from Credit Suisse; and the purchase of a €175m portfolio of funds and directs from Monte dei Paschi di Siena.
In 2011, Coller Capital won Private Equity International’s ‘Secondaries Firm of the Year’ title for the 8th successive year. In 2012, Real Deals named the firm ‘Secondaries House of the Year‘. And in both 2013 and 2014, Financial News named Coller Capital ‘European Secondaries Firm of the Year.’
For more information about Coller Capital, visit the firm’s web site at: www.collercapital.com.
The Latin American Private Equity & Venture Capital Association (LAVCA) is a not-for-profit membership organization dedicated to supporting the growth of private equity and venture capital in Latin America. LAVCA’s membership is comprised of over 160 firms, from leading global investment firms active in the region to local fund managers from Mexico to Argentina. Member firms control assets in excess of US$60 billion, directed at capitalizing and growing Latin American businesses. For more information, visit www.lavca.org.
For more information visit www.lavca.org.