Private Equity Firms Optimistic About Latin America

The results of a survey published by LAVCA and Coller Capital are good news for Latin America.

Of the 105 international private equity investors polled, 38% reported plans to increase new commitments to Latin American private equity funds over the next year, and 49% said they would maintain their existing commitments. Moreover, 43% said they would consider investing in a first-time Latin American fund.

The LPs polled were most optimistic about the region’s potential for economic growth and deal flow. However, remaining issues were acknowledged, including underdeveloped M&A and IPO markets. Taxes and regulations were also cited as problematic.

Despite the obstacles in sight, respondents reported positive expectations. Three quarters expect annual net returns of over 16% from their Latin American PE funds (excluding Brazil), as do two thirds with respect to their Brazilian PE funds.

By all indications, private equity will continue along the path of growth in Latin America. In 2010, Latin American PE funds secured US$8 billion in commitments, and in 2011, that number rose to US$10 billion – a 27% increase. Local firms Gávea Investimentos, Vinci Partners, BTG Pactual and Patria Investimentos were the groups most connected to the funds.

Respondents reported finding consumer goods and retail the most attractive opportunities for investment in Latin America over the next three years. Latin American LPs also expressed excitement about clean tech and life sciences, while international LPs were more enthusiastic about financial services and agribusiness. The countries most favored by the LPs polled were Brazil, Peru, Colombia and Mexico.

Further information and results may be found on the LAVCA website.