Investing in South America can be tricky. Each country has its own characteristics and most of the region has had its share of recent economic and political turmoil.
For The Carlyle Group, which closed a dedicated Peru fund on $308 million in March 2013 and invests to a lesser extent in Chile and Colombia, diversifying among South American countries is central to a sound strategy for the region.
“The economies in Latin America are relatively small and the opportunities in each country on a standalone basis are relatively scarce,” says Marco Peschiera, managing director and head of the Peru advising team at Carlyle.
“Even in the few countries that have the depth to do standalone private equity, like for example Brazil or Mexico, it’s important to diversify the political and economic risks. I think GPs are now looking at Latin America as a platform. A regional fund doesn’t have to consider all of South America. You can cherry-pick your sub-region.”
With half a dozen investments in the Carlyle Peru Fund, which was 75 percent invested as of May, the firm has been focused on managing the portfolio. It is currently considering the right level and kind of diversification for its focus on the region as well as its options for the next vehicle. The firm also has Mexico- and Brazil-focused funds.
“We will determine the format of our future Peru, Colombia, Chile and Latin America fundraising activities based on how we see future opportunities on a sub-regional and regional basis from our offices in Lima and São Paulo,” Peschiera says.
“A new Carlyle Peru Fund might be more balanced among the three countries, Colombia, Peru and Chile, and, who knows, leave the door open to invest in Argentina in case Argentina turns the corner, ” he adds.