Content Includes: Preqin Special Report: Latin America Can Investor Appetite Drive Growth? Private Equity in Latin America March 2013 We give an overview of the Latin American private equity market, including investor appetite, deals activity, fundraising trends and performance. Country Focus We examine investor preferences for country- specific Latin American investment, as well as fundraising and deals data across specific countries. Private Real Estate We assess the private real estate industry in Latin America, including historical fundraising and the outlook for the year ahead. Infrastructure We take a closer look at infrastructure in Latin America, including deals data and key fundraising trends. alternative assets. intelligent data. Preqin Special Report: Latin America, March 2013 Foreword Private equity in Latin America has grown in prominence over the last few years, with fundraising levels in 2011 reaching an all-time high, both in terms of the aggregate capital raised and the number of funds closed. Despite lower levels of fundraising in 2012, fund managers have continued to raise funds purely focused on the region, with a greater number of funds in market as of January 2013 than in January 2012. Preqin’s survey of over 40 global investors with an interest in Latin America demonstrates that investor confi dence in the region also remains strong, with a signifi cant proportion looking to make further investments in the region in the future. The outlook for buyout and growth funds looks particularly positive for 2013, with a large proportion of investors interested in Latin America targeting these fund types specifi cally in the coming year. Funds focusing purely on a specifi c country within Latin America will continue to be in competition with geographically more diversifi ed vehicles, but a signifi cant proportion of investors display an interest in country-specifi c funds, particularly in the more developed private equity market in Brazil, as well as Colombia, Mexico and Peru. However, with the number of pan-Latin America-focused funds increasing in 2012, investors are likely to continue to look to gain diversifi ed exposure to the region in order to minimize the risk in investing in this still emerging market. Preqin Special Report: Latin America provides an exclusive insight into the private equity market in Latin America, including investor appetite, key fundraising data, deals and performance. The report draws exclusively from many of Preqin’s online products and services, which provide over 10,000 industry professionals with data on all aspects of alternative assets, including fund managers, fundraising, investors, deals, performance, service providers and more. We hope you fi nd this report useful, and welcome any feedback you may have. For more information, please visit www.preqin.com or contact [email protected] Key Findings ● 57% of investors with an interest in Latin America view the region more favourably than other emerging markets. ● 22 Latin America-focused funds closed in 2012, raising an aggregate $5.1bn. An overview of private equity in Latin America can be found on pages 3-6. ● 43% of the aggregate capital raised by Latin America-focused funds in 2012 was for vehicles focused on Brazil. ● 52% of investors with an interest in Latin America see Colombia as presenting the best investment opportunities in the region. More country-specifi c Latin America analysis can be found on pages 7-9. ● Of the real estate funds in market, the majority of both the number (64%) and the aggregate target capital (63%) is being raised by Latin America-based fund managers. More real estate information can be found on page 10. ● The core infrastructure industries of energy, transport and utilities account for 85% of the number of deals completed in the region since 1994. More infrastructure information can be found on page 11. All rights reserved. The entire contents of Preqin Special Report: Latin America are the Copyright of Preqin Ltd. No part of this publication or any information contained in it may be copied, transmitted by any electronic means, or stored in any electronic or other data storage medium, or printed or published in any document, report or publication, without the express prior written approval of Preqin Ltd. The information presented in Preqin Special Report: Latin America is for information purposes only and does not constitute and should not be construed as a solicitation or other offer, or recommendation to acquire or dispose of any investment or to engage in any other transaction, or as advice of any nature whatsoever. If the reader seeks advice rather than information then he should seek an independent fi nancial advisor and hereby agrees that he will not hold Preqin Ltd. responsible in law or equity for any decisions of whatever nature the reader makes or refrains from making following its use of Preqin Special Report: Latin America. While reasonable efforts have been made to obtain information from sources that are believed to be accurate, and to confi rm the accuracy of such information wherever possible, Preqin Ltd. does not make any representation or warranty that the information or opinions contained in Preqin Special Report: Latin America are accurate, reliable, up-to-date or complete. Although every reasonable effort has been made to ensure the accuracy of this publication Preqin Ltd. does not accept any responsibility for any errors or omissions within Preqin Special Report: Latin America or for any expense or other loss alleged to have arisen in any way with a reader’s use of this publication. 2 © 2013 Preqin Ltd. / www.preqin.com Preqin Special Report: Latin America, March 2013 Private Equity in Latin America The Latin American private equity market has evolved Fig. 1: Countries and Regions within Emerging Markets that Investors considerably in recent years, with an ever-increasing number of View as Presenting the Best Opportunities* funds in market focusing on the region specifi cally. Increasing investor interest in Latin America-focused private equity funds Asia 49% has led to a surge in fundraising, with aggregate capital raised China by the 41 funds that closed in 2011 reaching $15.2bn, the 31% highest amount raised in any single year. A number of large Latin America 27% Brazil-focused funds held a fi nal close in 2011 (see page 7), India 22% Central and 20% partly driven by increasing investor confi dence in Brazil’s rapidly Eastern Europe growing economy and more stable market in 2011. Despite Africa 18% the aggregate capital raised by Latin America-focused funds Middle East 14% closed in 2012 decreasing signifi cantly to 22 funds closing on Brazil 12% an aggregate $5.1bn, investors still view the region positively, with many looking to either maintain or increase their portfolio Russia 8% allocations to Latin America over the next 12 months. Other 4% 0% 10% 20% 30% 40% 50% 60% Emerging Markets Proportion of Respondents Source: Preqin Global Investor Survey, December 2012 Although Latin America-focused fundraising has experienced growth in recent years, other emerging markets such as Asia are Fig. 2: Proportion of Aggregate Capital Raised by Emerging Markets- still garnering more capital and investor interest. In December Focused Funds by Region 2012, Preqin conducted a survey of over 100 LPs from around the world and found out about their current appetite for different 100% 2% 3% 1% 4% 2% emerging markets. Although Latin America was named by a 4% 6% 5% 6% 4% signifi cant 27% of respondents as presenting the best investment 90% 80% opportunities, Asia and China were stated as attractive by 49% Africa and 31% of respondents respectively. 70% 61% Asia 72% 73% 70% 60% 71% 73% 73% 74% Fig. 2 shows that Asia has consistently accounted for between 74% 75% 50% Latin America 70% and 75% of the aggregate capital raised annually by emerging markets-focused funds since 2004. Latin America- 40% Middle East & Israel 30% focused funds have historically contributed a much lower 13% Diversified Multi- 8% Regional 7% proportion of the aggregate capital raised by emerging market- 20% 8% 8% Proportion of Aggregate Capital 8% 5% 14% 6% 13% 7% 9% focused funds, peaking at a high of 20% in 2011. 9% 8% 20% 6% 10% 9% 2% 15% 12% 5% 9% 8% 9% 8% 5% 5% 8% 2% 0% 1% The proportion of aggregate capital raised by emerging markets- 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 focused funds represented by Latin America-focused vehicles fell Source: Preqin Funds in Market Online Service from 20% in 2011 to 8% in 2012, demonstrating that fundraising remains challenging in the region, particularly compared to Asia. Fig. 3 shows that the number of Latin America-focused funds Fig. 3: Latin America-Focused Funds in Market over Time, 2007 - 2013 in market has grown over the last year, from 55 funds targeting an aggregate $20bn in January 2012 to 68 funds targeting an aggregate $18bn as of January 2013, the highest number of 70 68 funds in market in the period 2007-2013. Fund managers looking to raise capital for Latin America-focused funds in the coming 60 year may fi nd fundraising challenging, given the increasingly 55 51 crowded market and competition for LPs’ emerging markets 50 45 44 No. of Funds allocations from managers targeting regions like Asia. Raising 40 37 Investor Appetite for Latin America 30 Aggregate 22 Target Capital 20 However, there is still signifi cant investor appetite for emerging 20 18 ($bn) 16 16 markets, and for Latin America specifi cally. In Preqin’s December 12 12 2012 investor survey, 60% of respondents stated they invest in 10 5 emerging markets and a further 14% said they are considering 0 the possibility in the near future.