In a context where Latin American investors of all types are increasingly turning to alternative assets to build their portfolios, capital from the region is once again focusing on neighboring markets. With particular attention to Brazil and Mexico, a Preqin survey revealed that Latin American investors see the best opportunities within their own region.
In a poll conducted late last year, professionals surveyed by the alternatives-focused firm identified Latin America as the region with the best investment opportunities over the next 12 months. Sixty-seven percent of participants expressed this view, surpassing the 43% who expect better opportunities in North America.
This marks a clear shift from the previous year’s survey, when 79% expected the main investment opportunities to be in the North, and only around 45% were focused on Latin America.
According to Juan Carlos Martín, founder of Mexican firm Galleon Capital, this reflects a secular trend, though some cyclical macroeconomic factors may also be at play. “The region offers some nearshoring-related opportunities that are attracting international GPs to buy in the region,” he explained during a Preqin webinar. He added that international managers have been more active in the region over the past four years.
Market timing is also a factor, with higher real interest rates affecting asset valuations and creating what Priscila Rodrigues, head of FOF Alternatives at Brazilian manager XP Asset, described as a “buyer’s market.” “Investors who understand long-term investment perspectives know that this is the right time to be deploying capital,” she said, noting that companies are well positioned to generate value as rates decline. “I’m seeing more local appetite because of that,” she added.
When broken down by market, the region’s two largest economies are also seen as the most attractive destinations. Seventy-three percent of respondents believe Brazil offers the best opportunities this year, followed by 63% pointing to Mexico.
Preference for Private Debt and Infrastructure
One alternative asset class, in particular, is capturing Latin American investors’ attention: private debt. When asked about the best opportunities by asset class, private debt topped the list, with 58% of respondents choosing it.
Next, each with 46% of preferences, were infrastructure and private equity. While the interest in private equity aligns with global appeal, Latin America stands out for its relatively higher interest in private debt and infrastructure compared to global figures.
Unsurprisingly, these three asset classes also lead in future investment intentions. A strong 60% of professionals surveyed said they plan to increase their positions in private debt, followed by 48% for private equity and 41% for infrastructure.
What makes these strategies attractive? For Martín, part of private credit’s appeal lies in its relation to one of the major challenges in alternative investments: liquidity. Private debt assets, he explained, tend to be “self-liquidating” over time as the borrower repays. “By year seven, you’ve recovered almost all your capital,” he emphasized.
At Colombian MFO Ikalon, the view is similar. Sebastián Valderrama, head of alternative investments at the firm, called the asset class in Latin America “a massive opportunity,” given the significant financing gap, larger than the global average, and the presence of “very interesting credit counterparties” that can align with “strong covenants.”
As for infrastructure, Valderrama also sees a favorable outlook. “In the region, many countries are 20 to 30 years behind in their infrastructure plans, and there’s also poor management and energy deficits. So infrastructure itself is going to be a very interesting segment in the medium and long term,” he explained.
Growth and Innovation
Although alternative assets still represent a smaller share of portfolios than in developed markets, they are occupying an increasingly larger portion of Latin American portfolios, according to Preqin data.
Globally, average institutional allocation to alternatives stands at 19.6%, out of a total of $8.9 trillion in AUM as of 2024. This includes 6.3% in private equity, 5.6% in real estate, 2.9% in hedge funds, 2.2% in infrastructure, 1.6% in private debt, and 0.8% in natural resources.
This marks progress compared to just a few years ago. In 2022, when global institutional AUM was around $7.6 trillion, 15.7% was allocated to alternative assets.
In Latin America, allocation levels vary by country, due to differing regulations and restrictions, and by manager, but Galleon Capital, XP Asset, and Ikalon all note that allocations tend to be lower than the international average.
There has also been growing interest from other types of clients, such as family offices. “They’re seeking alpha, and some of them have already been investing in alternatives internationally,” said Rodrigues, adding that this segment faces fewer restrictions when investing abroad than pension funds in Brazil.
“Each year, the entire segment has become more and more sophisticated. We’re seeing more family offices using an alternatives-based approach, both locally and regionally,” added Valderrama, noting that product innovation, such as semi-liquid strategies, open-ended funds, secondaries, and continuation funds, is helping to meet the demand for liquidity.
