LatinFinance - September/October 2017 - 88

PARTING
SHOT
The IFC aims to go beyond the standard A/B loan
structure and build a more active portfolio in
Latin America, says Irene Arias

Dedicated equity
We aim to do about $25 billion in business [in Latin America]
over the next five years, but not so much in traditional A/B loans.
We aim to use more innovative financing structures that will allow
us to bring in investors like insurance companies and pension
funds, both outside and within Latin America, that have an
appetite for longer tenors and that help meet the financing needs
in critical sectors like infrastructure.
One example is the Managed Co-lending Portfolio Program, or
MCPP, where we have raised money from institutional investors.
The advantage is that we are not subject to market conditions at
the time of closing a deal because we have the funding in place.
The institutional investors are happy because they get rated notes
with the returns they are looking for.
We are now raising two types of platforms - one for general
purposes, with a heavy focus on infrastructure, and one for
financial institutions. That is something that is in the works at the
moment.
We are the largest equity investor in emerging markets. Equity
investments have traditionally been one of the things that have
distinguished us and given us a footprint in the region. We are seen
as long-term partners. But we cannot rely only on our balance
sheet. We need to find other sources of capital.
We are raising a dedicated equity fund for Latin America, which
will allow us to take larger equity tickets in all sectors. We have not
set a target size, but I imagine that it will be at least $1 billion. It will
be primarily a private equity fund. The aim, in many cases, will be
to help companies to do an IPO and find our exit through an IPO.
We would take a minority stake, typically less than 20%, but with
the parallel investments through our asset management company
and the equity fund, we could increase that percentage. Our
standard holding period is about four to five years.
The investors in the fund are likely to be many types of
institutional investors from all parts of the world. The majority

88 L ATINFINA NCE.COM - September/October 2017

"WE ARE RAISING
A DEDICATED
EQUITY FUND
FOR LATIN
AMERICA. I
IMAGINE THAT
IT WILL BE AT
LEAST $1 BILLION"

will most likely be private
investors, but we are open
to having a diversified
investor base. It is one of
the things that attracts
companies when we
co-invest with a fund.
They then start their own
direct relationships with
institutional investors that
they would otherwise not
have access to.
My dream for the new
Latin American equity
fund is to replicate the
model of the China-Mexico
Fund. We have all the good
things of an active private
equity manager, but with
a longer horizon and more
flexibility. It is the kind of
active equity investment
that we plan to do in the
future. LF

Irene Arias is director
for Latin America and
the Caribbean at the
International Finance
Corporation (IFC), the
private sector arm of the
World Bank. This article is an edited transcript of her comments in an
interview with Mick Bowen.
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