Mexican Pensions to Buy $200m in PE Fund

(Reuters) – Mexico’s pension funds will take a $200 million stake in a fund that invests in private equity in the coming days, those involved in the deal said, as the risk-shy funds search for bigger returns.

Roughly half of the country’s private pension funds, known as Afores, will be involved in the transaction that should be listed on the Mexican stock exchange in the coming days, said Luis Alberto Harvey, managing director of Nexxus Capital, which will receive the funding.

“We have everybody lined up,” he told Reuters on Thursday at a conference hosted by Latin Finance. “We are waiting for a couple Afores to pass their final committees. That is why I can’t give the exact amount.”

The private equity stake was structured by Merrill Lynch (BAC.N) and will be listed on the Mexican stock exchange, although pension funds are the only investors.

“The sweet spot has been offerings in the $100 to $200 million range,” said Emilio Mahuad, a managing director at Merrill Lynch, who is helping shepherd private-equity funds like Nexxus Capital to the Afores.

Mexico’s private pension funds manage about $85 billion in assets — mostly government debt and low-risk corporate bonds. The funds’ regulator has recently allowed them to expand their holdings and that should mean more capital for private equity, said Leonardo Pin Fernandez, chief investment officer of MetLife Mexico.

“There are already 30 more such investments in the pipeline,” he said about the new securities designed for the Afores.

Fund managers say that Credit Suisse, Santander and Bancomer are among the banks most active in structuring new securities and bringing them to the Afores in regular investor road shows.

“The offering rhythm is very intense. We are seeing probably two or three projects per week,” said Enrique Solorzano, director of investments for ING bank’s Afore. (Reporting by Patrick Rucker)