Latin America lures private equity

Pension reform and increasing institutional investor appetite for alternatives have drawn managers to the region.

Latin America is seeing the presence of more private equity players with the addition of StepStone.

The global investment firm announced on Tuesday it had opened an office in Lima, Peru – its second in the region after its Brazil office – to tap the growing pool of institutional investors attracted to private equity. Shannon Bolton, former country head for Latin America at Capital Strategies Partners, joined StepStone in October as managing director based in Lima.

“It’s an exciting time for institutional investors in South America to be investing in private markets,” Bolton said in a statement. “Regulatory changes combined with deeper investor knowledge have caused a dramatic rise in appetite for alternative investments over the past few years.”

In addition to running StepStone’s Lima office, Bolton will lead the firm’s business development activities in the Andean region.

More than 50 percent of Latin American investors polled by the Latin American Private Equity and Venture Capital Association are planning to increase their allocation to private equity in the next 12 months, the industry body’s 2018 Limited Partners Opinion Survey revealed.

In Chile, pension reform introduced last year has widened access to alternatives, allowing public pension funds to invest in eight kinds of alternative investments, including foreign private equity funds, foreign private debt funds and participation in syndicated loans. As a result of this, Chile’s risk regulator, the Comisón Clasificadora de Riesgo, added Hamilton Lane, Lexington Partners, Partners Group and Triton Partners to the list of approved managers in March.

Half of the top 10 firms in the latest PEI 300 rankings have a presence in South America. The Carlyle Group, which ranks first in the listing, has offices in Lima and São Paulo. Blackstone, CVC Capital Partners and Warburg Pincus, which rank second, fifth and sixth, respectively, also have outposts in São Paulo. Neuberger Berman, which placed eighth in the ranking, has offices in Buenos Aires and Bogota.

In July, Ardian opened an office in Chile, aiming to grow its investor base and source secondaries deals from Latin American sellers, joining fellow secondaries giant Lexington Partners, which had opened an office in Santiago in 2016.