In the last of the LatAm report series, we turn to Colombia, the fourth largest LatAm market in terms of assets under management.
He sees the minimal infrastructure spending as a cause for concern, as it increases the cost of companies doing business in Colombia. “Currently our only exposure is to the oil sector, where the government has been very pro-business due to the underinvestment in the past 10-15 years within the sector. Oil production growth in Colombia remains above global norms in the coming years, which should help drive earnings of these companies.”
Private equity investors are showing increasing interest in Colombia, along with Peru, Chile and Mexico. Urs Wietlisbach, co-founder of the $27bn Partners Group, a private markets investment manager, says the region’s attractions include strong economic growth and low government debt.
In October last year, Advent International, another private equity group, opened an office in Bogotá, its fourth in Latin America, after Buenos Aires, Mexico City and São Paulo. The Bogotá office serves as a hub for an investment strategy that targets high-growth companies across Colombia, Perú and Central America. Sectors of particular interest are energy, resources, financial services, pharmaceuticals and retail.
Pantheon Ventures, a London-based private equity funds of funds group, is entering the market, while Canadian firm Sarona Asset Management is launching its second frontier markets private equity fund investing in LatAm private equity managers. HSBC Asset Management in January launched a long-only frontier markets equity fund, with exposure to the region.
The LatAm hedge fund industry is surging, though 80% of it is based in Brazil, which has the most liquidity and market capitalisation. Outside Brazil, the hedge fund sector can be said to be in its infancy, in terms of activity, capitalisation and regulation.
A significant development for the region is the opening of a regional stock exchange, the Mercado Integrado Latino Americano, which started operations in May 2010. The founding members of Colombia, Chile and Peru have been joined by Mexico, creating a stock exchange with a global presence. The combined market capitalisation is expected to exceed $1,000bn.