Invest in Private Equity Funds


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Private Equity Funds

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Invest in Private Equity Funds

  1. 1. INVEST IN PRIVATE EQUITY FUNDS FAVORABLE ECONOMIC CONDITIONS • Macroeconomic stability and strong economic performance in the long run. Colombian economy grew 6.6% in 2011 and 4% in 2012. • Controlled inflation under the target. In 2012, inflation closed at 2.4%. • Reduction of the unemployment rate. In December 2012, unemployment rate was 9.6%, accumulating 5 consecutive months with a rate of one digit. • In 2013, estimated population is about 47 million inhabitants. Colombia has a growing middle class, which in 2012 was 25% of the total population. • GDP per capita higher than US$10,000, almost twice the amount recorded in 2000. Controlled inflation under the target GDP growth 2012 Investment rate as a percentage GDP • 20.5 million people (66.5% of the adult population) have at least one financial product; and the credit card users reached 5.9 million in September 2012, 7.4 % more than in the same period of 2011. • Domestic investment rate was close to 30% (as a share of GDP). L ib erta y O rd e n
  2. 2. POTENTIAL GROWTH OF THE EQUITY FUNDS INDUSTRY 01 In 2012, Colombia maintained its fourth place among 12 Latin American and Caribbean countries in the 2012 LAVCA Scorecard on the Private Equity and Venture Capital Environment, which measures favorable conditions for development of the PEF industry. how the country evolved 02 It is remarkableto move from the position in the ranking, of capital 06 28% multi-sector in commitments are funds, 26% in infrastructure funds, 22% in realestate funds and 10% in oil and gas sector funds. 08 16 internationalingeneral partners have presence Colombia, from which 7 have local investment funds. also offer investment 07 Other sectorsfor private equity funds: opportunities 3,320 energy, tourism, health care, forestry, agribusiness, and ITCs. 2,691 2,414 Colombia accounts 1% of fundraising in Latin America. 04 According to Bancoldex, there are 32 closed funds with capital commitments of more than US$3.4 billion. There are also 15 fund raising initiatives with a US$ 828 million target. capital commitments have 05 Thecompounded annual growthregistered a of 71% Source: Bancoldex - Department Capital Funds. 3,731 7 in 2007 to 4 in 2012. 03 CAPITAL COMMITMENTS US$ MILLIONS, 2005-2013. 1,473 980 429 79 79 2005 2006 between 2005 and 2012. 2007 2008 2009 2010 2011 2012 2013
  3. 3. Strong Regulatory and Institutional Framework • According to LAVCA, one of Colombia’s strengths is its attractive regulatory framework to the establishment and management of private capital funds. • With the Decree 2175 of June 2007 (now contained in Part 3 of Decree 2555 of July 2010), interest in private equity funds has notably increased in the country. • Colombia has made greater progress in order to improve its business environment, and actually ranks 45 among 185 economies, according to the Doing Business 2013 report. • In 2009, the Bancoldex Capital Program was created, in order to promote and develop the private equity industry in Colombia. • In July 2012, Bancoldex and the Multilateral Investment Fund of the Inter-American Development Bank, created the Colombian Association of Capital Funds (COLCAPITAL), in order to promote and strengthen the private equity industry in Colombia. • Colombia is also recognized for its investors protection: is sixth in the world and first among Latin American countries.
  4. 4. Availability of Local Equity and Access to Equity Markets There is an excellent opportunity to obtain local equity resources from institutional investors like pension funds and insurance companies, which have had great returns in the last few years. In Colombia, there are 4 private pension funds (Protección, Porvenir, Colfondos and Skandia) and about 30 insurance companies with investment capacity in capital funds. Between January and November 2012, the value of obligatory pension funds reached US$63.1 billion, about 23% of GDP. The funds value recorded a compounded annual growth of 22% between 2005 and 2012. In 2007, changes in regulations allowed to pension funds to invest in private equity funds. Since 2011, with the multi-fund system, a moderate pension fund can invest up to 5% in private equity funds and up to 7% if it is a high-risk fund. Other important institutional investors are development banks, financial corporations, and multilateral investment funds. The integration of Colombian, Chilean, and Peruvian stock markets, become an excellent exit strategy for private equity funds, with a greater diversification to investors and access to the capital market. Currently, MILA is the number one stock market in Latin America by the quantity of companies listed, the second one in stock market capitalization and third by trading volume.
  5. 5. MULTIPLE INVESTMENT OPPORTUNITIES Agriculture, forestry, and fishing 6.5% Electricity, gas, and water: 3.7% Transport and communications: 6.4% Restaurants and hotels: 3.4% Financial and business services: 20.5% Construction: 8.5% Commerce: 9.0% Social community and personal services: 16.8% COLOMBIA’S GDP BY SECTOR, 2012 GDP: US$343,645 MILLION* Source: DANE. Colombia has a diversified economy with investment opportunities in different sectors. The service sector stands out, followed by manufacturing, mining, commerce, and construction. *Calculations performed on the value added. Mining: 12.3% Increasing foreign direct investment flows confirm the good time that the country has to attract investment. In 2012, the total amount of FDI grew 17.8%, mainly because of the greater investment in business and financial services (326%), manufacturing (159%), electricity, gas, and water (115%). Manufacturing: 13.0% Colombia has investment opportunities for small and medium sized enterprises in expansion and consolidation stages, which are mainly concentrated in the commerce, services, and industry sectors. According to the National Association of Financial Institutions (ANIF), the investment potential in those companies is due to the availability of labor and its contribution to growth. Micro, small, and medium companies make up 81% of the workforce and contribute on average 40% of GDP.
  6. 6. PRIVATE EQUITY FUNDS Brookfield is a company dedicated to management of real assets and private equity funds. The Brookeld Colombia Infrastructure Fund is focused on making infrastructure investments in Colombia in the energy, transportation, and public services sectors. Brilla Group: It is a private equity firm focused on the luxury beachfront hotel and resort asset class. The portfolio includes the Brilla Colombia Private Equity Fund, which has investment commitments from local pension funds and institutions, and it will invest exclusively in the Colombian luxury beachfront hotel asset class. Aureos Capital: It is the small and mid-cap private equity investment platform of the Abraaj Capital Group. The portfolio includes Fondo Aureos Colombia FCP, Aureos Latin America Fund I LP and Aureos Latin America Fund II LP, which seek long-term capital appreciation by investing in companies in several sectors.