Alternative allocations recover from pandemic downturn in Latin America — Preqin reports

LONDON, July 05, 2023 (GLOBE NEWSWIRE) -- Preqin, the global leader empowering the alternatives community with essential data and insight, published its Fundraising from Latin America: A guide to raising capital report.

The report finds that despite Latin America’s relatively smaller pools of capital and limited allocations toward alternatives, opportunities for fundraising in the region exists notably for pension funds, high-net-worth individuals (HNWIs) and family offices. Moreover, according to Preqin analysts, there is room for alternative investments to reach – and potentially surpass – pre-pandemic levels due to changes in regulatory limits, needs for higher returns, and a general increase in the accessibility of alternatives in the region.

The pandemic caused a temporary dip in activity in the region, but growth has returned. The total allocation to alternatives tracked by Preqin from all Latin America-based investors hit $100.7bn at the end of 2022, up from $96.4bn in 2021.

Private equity takes the lead

Looking at the specific asset classes, the post-pandemic allocation increases have been strongest in private equity, which rose by 53% by the end of 2021 to $32.8bn, and an additional 8% at the end of 2022 to $35.4bn. This was in part due to the strong performance of the asset class. Private debt grew three-fold, from $3.6bn at the end of 2020 to $15.2bn at the end of 2022. However, real estate remains at half of its pre-pandemic aggregate allocation at $20.9bn at the end of 2022, and infrastructure and natural resources are yet to recover to pre-pandemic levels.

Untapped potential for fundraising through pension funds and private wealth

Markets in Latin America have seen significant volatility in recent years as a result of deteriorating political and macroeconomic conditions. Opportunities to drive fundraising through pension funds and private wealth investors already exists, and regulatory changes and growing investor demand promise to drive this trend even further.

The Preqin report found that 62% of assets under management (AUM) of Latin America-based investors with tracked commitments toward alternatives are in public and private pension funds. Investors with tracked alternative investment histories of at least 10 fund commitments recorded on Preqin show that public and private pension funds are a key source of capital and are already willing to work with international fund managers.

Private wealth, including family offices and wealth managers, presents another opportunity in Latin America. That said, fund managers looking to raise funds from private wealth investors in the region will need to be strategic in garnering name recognition, regional presence, and further educating investors on alternative investments.

Cameron Joyce, SVP, Head of Private Equity, at Preqin says: “Latin American-based pension funds maintain a strong appetite for global private capital exposure. There is already a full roster of international GPs who have been capitalising on this by marketing their offerings in the region. The challenging domestic economic landscape has further heightened demand for international diversification, but pandemic-related outflows have curbed the amount of capital that can be earmarked for deployment.”

Preqin’s Fundraising from Latin America: A guide to raising capital – additional information: 

• Mexico: Pension funds in Mexico remain a relative bright spot for fundraising in the region due to relatively low allocations and favorable demographics that are leading to strong capital inflows.
• Chile: Chile increased its alternative asset allocation limits on all pensions in 2020. As of Q1 2023, the average Chilean pension is still under its allocation limit towards alternatives. There are many potential changes on the horizon for the country, but it remains a market worth considering.
• Buyout funds: Buyout funds are favored in Chile, Colombia, and Peru. The countries’ pension systems’ current alternative allocations show a tendency toward buyout private equity investments.
• Private Wealth: Private wealth investors in the region favour private equity, and globally, private wealth investors tend to be those that are under-allocated to the asset class. The global private equity allocation for family offices to private equity investments is 27% with a target of 29%, far higher than other types of investors.

Notes to editors

If you would like more information or would like to speak with the report author, please contact Dawn Bowles at dawn.bowles@preqin.com.

About Preqin

Preqin, the Home of Alternatives™, empowers financial professionals who invest in or allocate to alternatives with essential data and insight to make confident decisions. It supports them throughout the entire investment lifecycle with critical information and leading analytics solutions. The company has pioneered rigorous methods of collecting private data for 20 years, enabling more than 200,000 professionals globally to streamline how they raise capital, source deals and investments, understand performance, and stay informed. For more information visit www.preqin.com.