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Mexico’s private equity fund managers are in high spirits. Although the industry is small and relatively nascent, local GPs contend that Mexico holds strong prospects for high returns—pointing to a robust pipeline of proprietary deals and low valuations compared to the significantly more competitive Brazilian market. Perhaps most importantly, new regulations are having the desired effect of prompting local public pension funds, which manage approximately US$120 billion in assets, to begin investing in private equity. As local investors increase their exposure to the asset class, a growing set of international LPs are expected to follow.
Through the first three quarters of 2011, Mexico-focused funds raised less than US$300 million and invested in 10 deals with a disclosed transaction value of US$124 million. This report takes a closer look at some of the unique aspects of Mexico’s burgeoning private equity ecosystem and the challenges the local industry faces in developing Mexico’s potential to become a regional heavyweight over time.