Private equity boost for Latin America
By Martin Arnold in London

Published: May 12 2009

Latin America's nascent private equity industry is receiving a helping hand to survive the financial crisis as pension funds in Brazil, Peru and Colombia start investing in local buy-out, venture capital and infrastructure groups.

Private equity in Latin America makes up only a tiny fraction of the $2,500bn global industry. But it has been growing rapidly and many investors expect it to come out of the financial crisis in better shape than bigger counterparts in the US and Europe. "You don't have a mortgage crisis in these countries, consumer debt is much lower and banks are in a more stable condition," said Ernest Bachrach, co-head of Advent International 's Latin American business.

"Latin America will recover faster and not hit as low a bottom as Europe or the US."

Almost $6.4bn was raised from local and international investors by private equity groups operating in the region last year, according to the Latin American Venture Capital Association which today publishes its first annual report.

While the pace of fundraising slowed in the second half of the year, as the crisis started to bite, the emergence of local pension funds as private equity investors helped offset some of the decline.

Peru is the latest country to pass laws authorising national pension funds to invest in the higher risk, higher return strategies of private equity, which uses a mix of private investors' money and bank debt to invest in companies.

In one of the biggest examples, Darby Overseas, the private equity arm of Franklin Templeton Investments, and Stratus Group, a São Paulo-based investment group, raised $240m from Brazilian pension funds for a new infrastructure vehicle.

Source: Financial Times