Category: Funds

A second straight week of net inflows to EM debt funds was driven by new investment in local currency vehicles, according to analysis from ING, which cites EPFR and JPMorgan data. By contrast, crossover HY funds are hemorrhaging cash. In the week to February 27, some $163m (0.24% AUM) was allocated to EM debt funds, following $315m inflows the week before, says ING. “Where hard currency funds actually saw outflows of $70m (0.18%) local funds benefited from $121m (0.69% AUM) worth of new money,” says the shop. It adds that blended funds recorded $113m (0.88% AUM) of inflows. Crossover HY meanwhile lost a net $884m (0.53% AUM), following a $964m outflow the previous week.

Rio de Janeiro-based asset manager Gavea Investimentos will look to raise its third private equity fund later this year, Arminio Fraga, one of the vehicle’s founding partners, tells LatinFinance. The fund follows an $840m pool raised in March 2007 and a $350m investment vehicle raised in 2006. The size of the new fund has yet to be determined, though Fraga says it will not necessarily be larger than the last. “The recent market turbulence has helped the prospects for private equity in Brazil,” notes Fraga. He adds that a lack of capital market options for many companies leads them to consider private alternatives.

Following six weeks of outflows, LatAm equity funds posted inflows in the week ended February 20, according to EPFR. Flows to the region’s two biggest countries, however, were negative: Mexico posted outflows for the first time in four weeks as the US picture worsened, says EPFR. And Brazil funds extended their losing streak to 10 consecutive weeks. Meanwhile, Chile funds have seen inflows that boosted AUM by 13.7% so far in 2008.

EM Debt funds saw inflows of $315m in the week ended February 20, according to ING which cites EPFR figures. The positive flow representing 0.46% of AUM for the asset class marked a reversal from the previous week, when $303m was pulled out of EM. “The details behind the data reveal that the positive number was more related to local currency fund allocations, which benefited from US$319m (1.86% AUM) worth of new money,” according to ING. That suggests investors preferred local currency versus hard currency when it came to EM, adds the report. Hard currency EM funds suffered losses of $121m during the period.

Banco do Brasil Investimentos and Portugal’s Banif have created a private equity fund to invest BRL600m in Brazil, according to local media. The PE manager will target investment in companies with revenue of BRL300m-BRL800m, eyeing stakes of around 20%, according to Brazilian and Portuguese press.

LatAm equity funds saw another reduction in assets in the first week of February, according to EPFR. The region had outflows of $131.4m which brought all of the assets under management tracked by the service to $42.5bn. Brazi equity, which today accounts for $11.9bn of those funds, lost $3.8m, a small amount given the country’s weighting in LatAm. Brazil has had outflows during 12 of the last 22 weeks. EM Bond funds recovered during the period, posting inflows of $35m despite news of a court decision against PDVSA that resulted in widening of the country’s bond spreads and CDS.

LatAm private equity (PE) investors will focus their attention on Brazil and Mexico in the coming two years, according to KPMG’s annual survey of private equity in the region. In the survey, conducted with 140 investors at a conference on Wednesday, 42% of the participants say Brazil is their number one destination, while 34% named Mexico. Colombia was a distant third with 12% while Chile and Argentina garnered only 5% of responses. Participants also said Chile and Brazil were the most favorable economies for PE investing, assigning a “very favorable” rating of 35% and 38% to the two countries respectively. Mexico received an overall 28% score in the “very favorable” category while Venezuela received a 77% rating in the “very unfavorable” category. Investors also see infrastructure as the most attractive sector to invest in in the coming three years. Infrastructure and Energy / Natural Resources receive the highest marks – 69% and 66% – reflecting views on sectors with the best investment opportunities. Industrial is apparently the least interesting sector in LatAm. The category got a 21% mark.

LatAm PE investors don’t expect fundraising to exceed 2007 levels. According to a KPMG survey, 61% of respondents expect a flat or lower figure for new funds in the region. It is the first time since at least 2004 that the expectation for the region is not for significantly higher amounts. Last year was a banner year for LatAm-dedicated money, with GP Investments, Advent International, and Southern Cross all raising funds of at least several hundred million dollars each. Institutional investors, pension funds and European institutions are all expected to increase their exposure to LatAm PE in the coming year versus last year, while private investor contributions are seeing dropping off, says the survey.

Peru’s sol will likely continue appreciating in 2008, according to BBVA, which sees the currency appreciating to PEN2.90 this month and to PEN2.85 by the end of March. “Offshore investors will need to remain at the short end of the local bond curve or with “old “ central bank CDs, while local investors will have access to “new” central bank CDs, based on recent regulation,” notes the shop. BBVA’s recommendations on local Peruvian debt include a 1-year forward sol position starting December 10 2007, which it says has an effective return of. 2.72%. A long Peru 2037 trade recommendation has an expected dollar return of 0.38%.