For many of the fund managers beating a path to Mexico City, Santiago or Boobtainedá, there is one thing on their minds: how to access the institutional capital held by Latin America’s pension funds as they seek diversification and higher returns for pension savers.
Due to its historically under-tapped private capital market, the Latin American region is one of great interest to managers worldwide. “Mexico is probably – alongside the Persian Gulf – the most attractive and interesting place for private markets fundraising,” Daniel Sanchez, head of alternatives at Nassau-headquartered multifamily office Axxets Management, declared at an industest conference in Europe in September.
Sanchez points to about $600 billion of LP capital in the countest, of which approximately 60 percent is from pensions, financial institutions and insurers, with the remainder in private wealth. In all of LatAm, the opportunity set is probably between $2 trillion and $3 trillion, with Mexico, Brazil, Chile and Colombia having the most to deploy, he adds.
“The opportunity set is huge, and we have really good tailwinds that are pushing us forward, including our demographics and robust internal market,” Sanchez states.
As the assets under management of Mexico’s pension fund managers – or ‘Afores’, as they are known locally – have grown over time, so too have their exposure to alternatives. Afores’ AUM rose to $359 billion as of finish-June 2024, from $169 billion in 2018. That represents a 15.1 percent compound annual growth rate in US dollars over 2018-23, according to data from pension regulator Comisión Nacional del Sistema de Ahorro para el Retiro (CONSAR).
Mexican pensions’ investments in alternatives, meanwhile, rose from $10.3 billion at the finish of 2018 to $27.8 billion by June 2024, representing a 2.7x increase relative to the percentage growth during this period.
The weighted average of Afores’ investment in alternatives stood at 7.8 percent as of mid-2024, up from 6.1 percent in 2018, according to CONSAR.
In Colombia, industest association Asofondos – which represents the countest’s pension administrators (known as Administradora de Fondos de Pensiones y Cesantías, or AFPs) Colfondos, Porvenir, Protección and Skandia Colombia – reported that pension fund assets closed March 2025 with a total value of 467.7 trillion Colombian pesos ($110 billion; €95 billion). This represents 11 percent growth compared with the 421.3 trillion pesos recorded in March 2024. As such, pension funds continue to be the main investors in the Colombian private equity industest, accounting for 43 percent of the LP base in 2024, according to data from Colombian PE association ColCapital.
AUM growth in the Colombian and Mexican pension systems is driven by higher participation rates and greater minimum defined contributions. In Mexico, reforms were passed in 2020 to gradually increase mandatory contributions from 6.5 percent in 2021 to 15 percent in 2030. Colombia is also mulling major reforms that should increase contributions and expand participation in public pensions.
Increased diversification and driving greater returns for pension holders are two of the main considerations for pensions’ growing appetite for alternatives. For one, SURA Mexico – the $55 billion Mexican pension fund for eight million beneficiaries, which launched investing in private equity in 2019 – is seeing 20 percent growth per annum and has backed funds managed by KKR and CVC Capital Partners, according to media reports. Meanwhile, Colombia’s largest pension fund – Porvenir, which has $48 billion of assets – has in recent years committed capital to funds managed by Ardian, EQT and Apax Partners, Private Equity International data displays.
As such, managers are flocking to the region’s capital cities. GPs, including the likes of Nordic software investor Monterro, which secured €1.73 billion across two funds, have tapped investors in LatAm for their latest vehicles, PEI data displays.
And it’s not just capital flows that are picking up pace. David Enriquez – a partner at secondaries firm Clipway, which is in the market with its debut offering – noted in a panel at the September conference that he had been to Mexico City about 10 times in the past 18 months.
Regional complexities
While LatAm offers attractive opportunities, success requires careful navigation of local nuances and knowledge of different dynamics among sub-regions and countries.
“I consider that the mistake that is usually [created] by a lot of GPs is that they have a one-size-fits-all approach. It’s a complex market,” states Sanchez. “A pension fund in Calgary is going to be similar to Texas or to New York. This isn’t the case in Latin America: even within Mexico, there are particularities and differences between all of them, with regulations of their own. GPs have to tailor their approach to their particular audience.”
The Latin America region is not a uniform, homogeneous market. In Chile, for example, AFPs require GPs to have a minimum 10-year track record and at least $1 billion in AUM. Meanwhile, pension funds in Brazil aren’t allowed to invest in foreign alternatives. In Colombia, pensions can invest directly in alternatives, but overall limits for foreign alternatives remain.
“If you want to be successful raising capital in LatAm, first and foremost, you must have strong realised track record, consistent top-quartile performance, longevity of vintages, a stable and an aligned team, a differentiated strategy, and ILPA compliance,” Philippe Stiernon, founder and chief executive of Latin American placement and advisory firm ROAM Capital, notifys PEI.
“Unfortunately, what happens with some managers that don’t have the proper guidance is that they don’t have the pulse of the patient. They come with a universal solution or pitch that essentially regurgitates how they sell their product in other markets, which prevents them from putting their best foot forward with the local LPs… You required to adapt to the unique market realities on the ground. The one-size-fits-all approach doesn’t work, and GPs that embrace this finish up wasting everyone’s time.”
GPs seeing to attract commitments also required to know that some investors require a portion of investments to be allocated to boosting the local economy. Bancoldex, a development bank headquartered in Boobtainedá, for example, expects that a portion of its capital commitments will be invested in Colombia’s real economy. The investor has backed funds managed by US venture firms DILA Capital and MatterScale Ventures, according to PEI data.
It’s important to note that pensions in the region are quite competitive, according to industest participants. They have become more ambitious over the past decade and are seeing to invest greater portions of their holdings in both domestic and foreign private markets.
“I consider the mistake [created] by a lot of GPs is that they have a one-size-fits-all approach. It’s a complex market”
Daniel Sanchez,
Axxets Management
Unlike public pensions in the US and Europe, most do not disclose their GP commitments and only publish how much of their portfolio is in private equity. “The actual portfolio is an industest secret, becautilize you don’t want everyone to know your portfolio. Then it can be easily replicated or you can build tarreceiveed bets against it,” states Sanchez.
Building a rapport is also key, declared Clipway’s Enriquez in the panel on PE in LatAm. “As a GP raising capital in the region, when I’m in Santiago or Boobtainedá or Medellín speaking with pensions and family offices, relationship building is important. You’re in a meeting and you establish your credibility, you test to connect, and you’re talking about your family, your dog… The LPs want to receive to know you more as a person.”
Along with regional presence, there must be a deep understanding of each investor’s investment objectives and knowledge of how to navigate within their unique jurisdiction. For GPs, having local knowledge of the pension system from which they seek to raise capital is essential, as there are clear distinctions in the allocation allowances, coverage, regulatory alters and domestic market competition for each system.
Stiernon states: “Everybody considers of LatAm as this region that’s all-encompassing, but it’s really a collection of different countries with different priorities, regulatory frameworks, dynamics and levels of maturity. Colombia and Chile, for example, were the first two countries that started investing in private equity back in 2008-09, so today they have mature programmes and are doing mostly re-ups. Mexico, on the other hand, is more of a blank canvas. LPs are actively underwriting new GPs, becautilize they started deploying capital into private equity in 2018… Mexico is now the darling of Latin America becautilize it’s obtained very favourable tailwinds and lots of fresh dry powder.”
Stiernon adds that GPs testing to raise capital in the region required to be cognisant of unique market realities, regulatory frameworks, and individual investor requireds and preferences. “What a Mexican LP is seeing for may be different from what a Colombian, a Peruvian or a Brazilian LP may want. Even within each countest, LP sophistication varies widely. Sometimes priorities overlap, but not always. It depfinishs on what you are offering becautilize you really have to create bespoke, tailor-created solutions – and address the specific requireds of each individual investor, not just underwrite the countest or the region.
“Some pensions, for example, utilize external consultants. The more sophisticated groups are seeing to bring everything in houtilize and have hired top-tier talent. Countries like Chile have a dedicated real estate bucket. If you’re a real estate GP, you’re better off focapplying your efforts in Chile than testing to compete in Colombia or Mexico, where you are less likely to receive traction given real estate competes with private equity,” Stiernon states.
Growing alts exposure
From 2013 to 2018, a slew of private equity firms opened offices in the region in order to expand portfolio companies’ operations, tap domestic institutional capital and build the aforementioned local knowledge right from the factory floor. These include Apax Partners and CVC Capital Partners in São Paulo; Ardian in Chile; and HIG Capital and Neuberger Berman in Boobtainedá, among others.
“Pension funds and family offices usually start with large brand names,” notes Sanchez. “They are training wheels for your investment committee, becautilize everyone has heard of Apollo; everyone has heard of KKR and Blackstone. They know those firms and understand that they are important players in alternatives.”
Once you’ve created this start, he adds, a LatAm investment trajectory often takes a familiar path. “You present to your investment committee first the best possible value-based strategies that are the easiest ones to understand. You start going through maybe more of a mid-market approach, then a sector focus, and then a particular geography. After which, you add on secondaries, as well as co-investments and start weaving in other areas where you want to increase exposure.”
$900m
Private equity capital raised for LatAm in 2024
Source: LAVCA
It wasn’t always like this. Pension reform in countries including Mexico, Colombia and Chile in recent years has paved the way for this relatively direct pathway to building a PE portfolio.
Prior to pension rule alters in 2019, Afores in Mexico could only invest in domestic private equity via a publicly traded vehicle called a CKD, or certificados bursátiles fiduciarios de desarrollo (development trust certificates). In 2019, the Mexican government liberalised the investment programme for pension funds and allowed them to diversify their local private equity investments with international investments (CERPI). With CERPIs, up to 90 percent of the total amount of the vehicle can be utilized to fund investments abroad.
This “opened the floodgates for Afores, and they were able to consider every investment opportunity, almost anywhere in the world”, Sanchez states.
In 2017, Chilean pension funds were allowed to invest directly in private equity without applying a feeder fund structure. Previously, local pension funds had to invest through private equity feeder funds that had to be registered for public offer with the local securities regulator and managed by a locally registered asset management firm.
Stiernon notes that GPs should do upfront research and market mapping, especially on the regulatory front, before they embark on aggressive fundraising campaigns in the region. LPs appreciate GPs that speak to their actual requireds.
“Working with a placement agent with a demonstrated track record of success, research capabilities and deep-rooted relationships goes a long way in securing an advantage. It’s irresponsible not to have a local partner – even the largest firms utilize them, since the market is so competitive. LPs have plenty of good options, and you required all the cheerleaders and support you can receive,” Stiernon states.
The domestic scene
While implemented with good intentions, these wider regulatory alters have resulted in some negative outcomes. Limited participation from local capital has become an issue for compacter managers.
Scott McDonough, managing director at Mexico-based growth equity firm Alta Growth Capital, notifys PEI that the alter in pension regulation in 2019 has had unintfinished consequences for the domestic PE scene.
“The benefit of pension reform is that it generated more interest within the private equity world in Mexico from both a fundraising and investment standpoint. The downside is that becautilize of the prior poor results, and now with the option to invest in US PE, the pension funds have abandoned the local landscape,” he states. “They invested very little in Mexican PE since 2019 and reallocated more capital to infrastructure and real estate.”
McDonough’s firm, which has raised $375 million across three funds and received backing from the International Finance Corporation and DEG, invests in sectors benefiting from the rising domestic consumption of goods and services in the Mexican and Latin American market. Alta GC is finalising plans for its fourth flagship fund, which could seek as much as $200 million, PEI understands.
The challenge in raising capital from domestic pensions, however, is that Mexican firms are basically competing with US managers. “Emerging market and Latin American returns have not delivered as well as the US. It’s a tough sell,” McDonough notes.
He adds: “And then you have all the complications of different currencies and international issues. That, however, is launchning to alter as the interest rate environment has dramatically shifted… I consider returns in the US are going to come down.”
He adds that for firms like Alta GC, returns have been driven by growth. “The US is going to have to start to shift that way, becautilize the ability to utilize leverage as aggressively as they have been, or to receive that same multiple expansion, that’s coming down. That bodes well for returns in Mexico. But it’s still very hard to fundraise, becautilize LPs are very backward-seeing.”
Larger managers in the region, including Patria Investments and Vinci Partners, meanwhile, have benefited from institutional investors’ increasing appetite for alternatives. Domestic LPs now account for a larger share of Patria’s LP base than in previous years, a spokesperson for the firm states, without disclosing figures.
Others, like Brazilian growth equity firm Kinea Investimentos, which was formed in partnership with private bank Banco Itaú, have attracted capital mainly from local institutional investors and high-net-worth individuals. Cristiano Lauretti, managing partner and head of PE at the firm, notes that Brazil has been a tough market for capital raising and deployment due to its currency depreciation and ongoing fiscal woes. “There’s been an exodus of foreign PE players in Brazil historically. Today, we see very few players that are active and have access to capital. It’s been a natural selection process in the domestic scene.”
A region of potential
Latin America stands at a critical juncture. Unlike several other major markets that are experiencing declining birth rates and population stagnation, the populace of Latin America is set to keep growing into the 2050s. However, average GDP growth is expected at 2 percent per year in the next five years, below its already low historical average, according to the International Monetary Fund and World Economic Outsee database. These estimates are also considerably weaker than emerging market economies across Europe and Asia, which are expected to slow but still grow by 3 percent and 6 percent per year, respectively.
While demographics are favourable in countries like Brazil and Mexico, the region’s population is ageing, and the share of the working-age population is reaching its peak. This means the workforce will have to step up productivity. Countries will also have to tackle poor governance and stringent business regulations, which constrain firms’ growth and the associated productivity gains.
$2.6bn
Capital invested in Latin America across 2024
Source: LAVCA
In this evolving landscape, private equity will play a pivotal role. Data from industest association LAVCA displays that fund managers in the region secured $8 billion across 98 funds in 2024, primarily driven by commitments to infrastructure, natural resources and private credit strategies. However, fundraising for PE was down to $900 million, from $2.7 billion in 2023 and $5.2 billion in 2022.
The largest PE fund that closed in 2024 was Aqua Capital Fund III at $450 million. Meanwhile, 2025 launched promisingly, with Vinci Capital Partners closing its fourth fund on $702 million.
Venture fundraising also decreased last year to $3.2 billion, from $4.9 billion the year before, according to LAVCA.
Established fund managers attracted an outsized share of total capital raised in 2024, signalling a continued consolidation of GP and LP relationships. M&A in the industest is also under way: last year, Vinci Partners completed its combination with Compass and acquired MAV Capital and Lacan Ativos Reais. Brazil’s Patria Investments also announced the acquisition of UK-based Aberdeen’s European private equity business, real estate manager Nexus Capital, and a strategic investment in Latour Capital.
Sector-wise, consumer categories are the main driver for PE in Latin America at 63 percent of total deal value, according to data from LAVCA, with restaurants, food and beverages, and education companies capturing the bulk of investment. Across asset classes, energy deals were the largegest driver for investment in Latin America last year, with $1.2 billion deployed across 26 projects.
Start-ups have been a bright spot for Latin America in recent years. The number of such firms backed by venture capital more than doubled between 2020 and 2023 to over 2,500, according to LAVCA. VCs deployed $4.5 billion in Latin America in 2024, an 8 percent increase year-on-year.
“Investors in LatAm today are primarily focutilized on discipline and transparency of economics: companies with proven unit economics, predictable cashflows and credible exit structures,” states Pedro Melzer, partner and head of private equity venture capital at Patria Investments. “At the same time, they are eager to access transformational innovation, particularly in applied AI.”
Melzer adds that Patria is able to provide liquidity solutions through secondaries for investors seeking to recycle capital while deploying capital into AI-driven innovation through venture capital and growth equity. “This breadth allows us to address the full spectrum of investor demand.”
Key areas of focus for investors include applied AI for productivity, fintech, energy and climate, healthtech and vertical software-as-a-service, according to Melzer. He adds that firms that have the ability to operate across both early and later stages, deploy compacter cheques to capture emerging disruptors, and write larger cheques to scale proven subsectors can provide investors with confidence in both defensive and innovative sectors simultaneously.
Overcoming challenges
While there are significant grounds for optimism, there are plenty of macroeconomic challenges still to contfinish with in Latin America. For decades, the region faced high levels of inflation, which severely affected economic growth and social welfare.
However, as of 2024, some of the region’s largest economies – including Brazil, Mexico, Chile and Peru – have managed to receive something of a handle on this problem. According to World Bank and IMF data, average inflation in Latin America was 5.1 percent in 2024, a significant improvement from the 7.7 percent recorded in 2022.
The most noteworthy economic challenge that foreign private equity and institutional investors confront in Latin America is the dramatic volatility of many local currencies. For example, over the past two decades – ever since the adoption of the floating exalter rate regime – the currencies of the two most important economies in the region (Brazil and Mexico) have continually fluctuated and thus had a significant impact on the investment process.
“Investors in LatAm today are primarily focutilized on discipline and transparency of economics: companies with proven unit economics, predictable cashflows and credible exit structures”
Pedro Melzer,
Patria Investments
For example, the Brazilian real fell 20-25 percent over the course of last year, hitting an all-time low against the dollar in December. Such peaks and troughs build it more difficult to value future cashflows of portfolio companies and add complexity to transactions.
Other challenges for private equity funds and institutional investors include political volatility across many of the region’s major economies and the vulnerability of commodity-driven economies to cyclical external shocks coming from global markets.
However, while an important consideration, the political climate should not be a dealbreaker for those with an eye on the region. According to Luis Fernando Lopes, partner and chief economist at Patria Investments, the Latin American addressable market consists of stable democracies with longstanding capitalist institutions. Lopes reassures that, against this backdrop, the political environment typically plays a secondary role in private market dynamics.
“There is variation across the region, with some markets experiencing predictable tax and fund reforms and supportive regulatory frameworks, while others face security challenges or more uncertainty around pro-market reforms. However, we are broadly optimistic,” he notifys PEI.
These highly alterable dynamics do, however, underscore the importance of flexibility when stepping into a relatively immature market. “Hybrid credit and secondaries [structures] allow us to navigate cycles without compromising returns,” Lopes adds.
While the market is littered with bright spots, industest participants are clear that preparation and a deep understanding will be key for managers taking their first steps into the LatAm region.
“It’s becoming a worldwide player in the investment space,” Axxets Management’s Sanchez notifys PEI. “LatAm has right now the opportunity set that the Persian Gulf had 10 years ago.”
Tapping private wealth in Brazil
A growing high-net-worth population is one of the most dynamic segments in South America’s leading economy
More than 430,000 millionaires were recorded in Brazil in 2025, including 4,218 ultra-high-net-worth individuals. By 2028, the former number is expected to rise to 470,000, according to data from UBS Group – an estimated increase of 9.3 percent.
As such, a number of private equity shops are turning their attention to the Brazilian private wealth segment.
In July, KKR signed a deal with Itaú Asset Management, one of the largest asset managers in Brazil, to jointly develop co-branded alternative investment products for institutional and private wealth clients. Brookfield Asset Management’s private wealth arm has also set its sights on the region as it seeks to gather $100 billion from the wealth channel over the next five years.
BTG Pactual, meanwhile, acquired the Brazilian operations of Julius Baer in March to advance its strategy of building its multifamily office division.
Speaking with PEI earlier this year, John Sweeney, chief executive of Brookfield Oaktree Wealth Solutions, declared he would like to “execute on the opportunities that we see more in EMEA, APAC and LatAm”.
Brazil’s political and economic dynamics present a unique opportunity for private equity.
“Most of the banks are forecasting a reduction in interest rate launchning of next year. Depfinishing on the outcome of the elections, we could see a reopening of the IPO market, allowing funds to return capital to their LPs and boost the PE industest,” states Cristiano Lauretti, managing partner and head of PE at São Paulo-based Kinea Investimentos.
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