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Chilean Investors Forum, Santiago

Philippe_0782Philippe Schenk participated at the Chilean Investors Forum in Santiago, taking another look at the Latin-American landscape of private equity investments. The fund of funds executive panel discussed the increasing interest in the region though tepid forays by institutional investors.  Private equity expertise is still nascent, which prevents large engagement of foreign capital.  Due diligence in the region is slowed down by non-GP related assessments of political risk, currency outlook and expectation of economic stability.  This invariably leads to an expected risk premium over similar investments in developed countries.  Local pension funds understand private equity as an investment with the potential to generate attractive returns over public market investments but regulations limit exposure to PE and foreign assets.  However, Chile, in particular, is moving in the right direction of allowing pension funds more and more autonomy in their investment decisions.

Philippe also moderated the global institutional investor panel, with participants from a US public and a US private pension fund as well as an expert on Australian superannuations.  The panel was more focused on public equity investments but faced some of the same issues that private equity investors do.  Large allocators with limited resources often find it difficult to dedicate a lot of time to individual emerging markets and often default to a regional manager or even a global emerging markets specialist.  The relatively small percentage of LatAm in global equity benchmarks can also lead to indexing of the region.  Due diligence encounters the same issues on risks unrelated to managers as discussed above.

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