Colony Capital launches US$5 billion Latin American fund

Contxto – Apparently, Colony Capital is willing to match SoftBank’s capital commitment of US$5 billion to Latin America. The US-based firm recently announced its own fund worth US$5 billion to support the regional ecosystem.

In Summary

Back in April, the Californian-born fund acquired Dubai’s Abraaj Group Latin American operations. Rebranded as Colony Latam Partners, the multinational group plans to deploy these new funds through this newly acquired unit, according to a report from The Wall Street Journal.

Under the leadership of Miguel Ángel Olea, the fund will invest around half of its capital into Mexico. Meanwhile, the remaining will be spread out across other Latin American nations. The investment period of the fund will last from two to three years.

While not usually attracted to venture capital opportunities, Colony Capital certainly doesn’t shy away from them. As a private-equity firm, its main interest usually ranges from late-stage ventures to real estate. Nonetheless, it was made clear by company officials that the group aims to invest in small and medium businesses with little to no competition and growing industry potential.

In-Depth

While not strictly meant for startups, the investment will definitely impact businesses across various regional industries. For instance, US$3 billion will go towards Pacific Alliance countries. Another US$1 billion will go towards private equity while US$500 million will consolidate debt deals. The remaining will support clean energy pursuits, specifically.

Regarding potential investments in Mexico, Olea says that their plan is to allocate resources across a wide array of projects, with a strong emphasis in energy-related deals.

“They can be refineries or clean energy plants,” said Olea. “We are analyzing alternatives and open to possibilities.”

Nevertheless, they also intend to explore other industries of interest, including consumer goods and services. While Mexico’s economic outlook doesn’t look as promising for many, the fund believes the country has great attributes in its legal system. Language and culture also represent important variables for growth, the fund believes.

“65 percent of the GDP of Latin American countries in the Pacific Alliance is represented by private consumption,” said the company when asked by El Financiero. “The region is characterized by a growing middle class, with a demographic bonus, which represents 75 percent of the population by 2030.”

Thomas J. Barrack Jr., the president and director of the firm, recognizes the pessimistic overview of investors when it comes to Mexico. However, he believes the instability isn’t that severe. This is quite obvious considering the plan to exclusively invest around US$2.5 billion in Mexico.

Barrack also stressed that regional industries, in particular within Mexico, make Latin America an ideal destination for foreign investment. Along those lines, Mexico is an attractive location for investors who see beyond political conjunctures or changes in the market.

-VC