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Impact investors pour $1.4bn in unexplored corners

Impact investors pour $1.4bn in unexplored corners

Investors cast aside economic growth concerns and deployed $1.4 billion into Latin American impact investments in 2016 and 2017.

This is according to data compiled by the Aspen Network of Development Entrepreneurs (ANDE) and the Association for Private Capital Investment in Latin America.

The study showed that 55 of the 67 investors surveyed - including private equity (PE) and venture capital (VC) funds, family offices and foundations - deployed capital in Latin America through 860 investments over the past two years.

That’s a 49% increase in the number of deals and 96% increase in the amount of capital invested when compared to 2014-2015.

Most of the investments in 2016 and 2017 went to Peru, Ecuador and Mexico, with growth stage companies receiving the most money - $703 million through 378 deals.

The most popular investment sectors were microfinance and agriculture, which garnered $782 million and $300 million, respectively.

As with other regions, technology is getting attention in Latin America, with information and communication technology capturing $146 million.

The TPG Rise Fund, the so-called largest social impact fund in the world, also forayed into Latin America last December by investing $20 million into Digital House, a group of schools providing digital skills to Latin America’s next generation.

In terms of exits, which is an important consideration for PE investors, 11 investing firms reported 27 exits amounting to $42 million in 2016 and 2017.

Most of the surveyed investors came from Latin America, USA and Europe. But according to Rebeca da Rocha, ANDE senior regional chapter manager for Brazil, Asian investors will soon play a bigger role.

Currently, only two of the surveyed organisations, both based in the US, reported funding from Asian investors for limited partnership deals.

‘However, given that 37% of our respondents identify themselves as PE/VC fund managers, and given that Asian investors have been playing an increasingly important role in Latin American PE/VC activity generally over the past five years, one could expect that it is only a matter of time before some of this capital also finds its way into impact investing in the region,’ da Rocha told Citywire Asia.

Looking ahead, the survey’s respondents said they will increase allocations to Latin America by a total of $2 billion over 2018 and 2019.

Impact investors have allocated $4.7 billion to the region over the years, according to ANDE estimates.

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