Baring To Launch Latin American Funds

The fund-raising environment might be cold in the United States, but Baring Private Equity Partners is certainly keeping it hot in Latin America. Baring Private Equity Partners will launch two Latin American funds before the end of the first quarter.

The London-based company is set to launch a $250 million fund targeting Mexican growth-stage companies in the consumer products, finance, food products and housing sectors. The fund will mark Baring’s second foray into Mexico. In 1995 it closed the $67 million Baring Mexico Private Equity Fund LP. The firm also will begin marketing a larger fund to finance distressed companies primarily in Argentina and Brazil, although the firm hasn’t yet set a fixed target for the fund, says Varel Freeman, a New York-based senior partner with the firm.

Baring will primarily will look for companies with healthy fundamentals that have been battered in the public markets.

The 1995 launch of its Mexican investment fund marked Baring’s entry into Latin America, following that fund with Baring Latin American Partners I, a $300 million fund, in 2000. Both funds invested in private and public companies in the business services, financial services, communications, manufacturing, media and software sectors.

Although the region was struck hard by the financial meltdown that began in 2000, the funds have already realized gains, returned profits to their limited partners, and last year made four exits – one in Argentina, two in Brazil and another in Mexico. Its success with past Latin American funds may smooth some of the bumps Baring’s Latin American team expects to find as it begins a fund-raising drive.

“It remains a very difficult environment,” Freeman says. “There’s a flight to quality and a lesser amount of money in the marketplace. Limited partners are taking longer to do due diligence and they’re doing more due diligence than before. Investors are choosier and tougher and more probing in their questions.”

Baring plans to target institutional investors in the United States, Asia and Europe.

While the Mexican fund will finance growth-stage private companies, the Argentina/Brazil fund will focus on distressed companies in the consumer products, media and telecom sectors – what Freeman calls, “good companies in the wrong zip code.”

Baring Americas’ six-man investment team makes both majority and minority investments, opting for minority stakes only when a company’s management interests are aligned with the fund’s interests. Its Latin American portfolio includes companies like Consorcio Hogar, a Mexican builder of moderate-income housing, and Fomento Alimenticio, a Mexican maker of frozen foods like fish-shaped fish sticks. In Mexico, Baring Americas will scout companies with proven products and services and fund growth through expansion, consolidation or productivity enhancement.

Baring Private Equity Partners is the private equity arm of the ING Group. It manages funds worth $2 billion in Asia, Central Europe, India, Latin America, Russia and Western Europe. Baring Americas Partners maintains offices in Mexico City, New York and So Paulo.

Contact Carolina Braunschweig