1. Monument Group recently helped Linzor Capital Partners close its third Latin America-focused fund on its $621 million hard cap in just six months. Why is this a good time to put money to work in a region that has been experiencing slower growth?
[Linzor would] view it as a very good time to invest in the market. The slower growth has created more opportunities from a sourcing perspective, to find deals at more reasonable prices. There is no true buying on the cheap down there, but there is more opportunity to transact. The slowdown has become a catalyst for some of the sellers to revisit the market with more realistic expectations of value.
2. Linzor’s 2011 seems to be feeling the effects of a lower-growth economy. Is that an easy story to tell investors? Do you feel most investors are receptive to that explanation?
It truly tests the mettle of these managers, and if they’re good fiduciaries of third party capital. With that comes some challenges, and it brings to bear whether or not they have the relationships, the networks, the experience, all the things investors look for in order to weather the storm, or create value in terms of lower growth. Or bide time until growth improves. A lot of these GPs that invested in 2011-2012 have. It certainly is challenging in certain cases. But that’s the general view… In some ways it allows them to show their skill sets.
3. What other factors helped make this recent fundraising successful?
The team had been cultivating interest from investors since we closed their last fund, Fund II. And I would say that has helped accelerate interest. On the demand side, while it’s somewhat relative, there seemed to be a shift away from Brazil and more focus on the Andean region, or ex-Brazil – regional managers who were investing outside of Brazil. I think partly because some investors made their first bet in Brazil in the last fundraising cycle and were looking to diversify and get a broader exposure to Latin America.
4. To what extent do you believe broader demand for Latin America contributed to a successful fundraise?
In terms of the interest in Latin American funds … there seems to be interest in seeking out pockets of relatively stronger growth beyond our developed markets. Even though the growth has slowed a bit, there has been more familiarity, and investors have gotten more comfortable with the dozen or so managers who have established track records in the region.
5. Do you have any broad predictions for Latin America’s private equity market over the next 12 to 18 months?
I would say there is still considerable amount of interest and appetite for the region that will exist through the end of the year. I think the growth will only improve long-term, in terms of the middle class, and I think there will be opportunities to come. Despite the slowdown, and the reticence of some investors today, I think the tail on that interest is elongated.
There are some who, even if they missed this cycle, are looking for ways to expand their portfolio and further diversify. There will be pockets of interest for an extended period of time.