Emerging markets LatAm: Panama SWF on its first steps

The fund plans to dip its toes in private equity waters from 2018.

Fondo de Ahorro de Panamá is one of the latest sovereign wealth funds to enter private equity.

The $1.4 billion vehicle intends to start investing in the asset class towards the latter part of 2018, allocating 5 to 10 percent of its assets to private equity, most likely through fund investments, as well as through funds of funds and secondaries.

Abdiel Santiago, chief executive officer and chief financial officer of Fondo de Ahorro de Panama, says his team is getting up to speed and considering some key aspects of investing in the asset class.

Abdiel Santiago

“For us it’s a learning curve,” he says. “We have not invested in the asset class before so there’s a lot of education going on. We are engaged in getting our feet wet on fees, valuations and the operational aspect of how the private equity space works.”

Santiago explains that in addition to focusing on understanding how the fee structure works and how valuations are calculated and would reflect on the fund’s portfolio, his team is also working on understanding how transparent the asset class is, how to best benchmark private equity and the impact of its J-curve on a portfolio.

The fund, which was created in 2012, is currently invested in public securities, predominantly fixed income in the US, with about 15 percent in public stocks.

“At the end of the day, we’re a long-term fund and alternatives, specifically private equity, fit well with our horizon,” Santiago says.