EDITOR’S NOTEChief Executive OfficerAdam Raleigh

ManagementGiseli AkabociKenneth BaucoKilby BrowneCharles FathersWilliam FrankPaloma LimaZaianna OrtizAmir OukiTim RaleighAhmad Sahar

EditorialSeth Fraser Keoni HarrisonKarishna PerezLarissa GuimaraesMaria RodriguezVirginia SchmithalterJohn ZajasAline Viana

Private Equity GroupAnna GonzalezLiana GriegAna Mello

Real Estate GroupDaniel KimPablo OliveiraAndres OrtizRoy Salsinha

Energy & Infrastructure Projects GroupJavier GrullonCarolina Gomez-LacazetteDaniel Para MataAna Carolina RomeroJavier VergaraJack Schwarten

Hedge Funds GroupBrian RogersMauricio Silva

Institutional Investors GroupCarolina BarretoHugo Della MottaMarcela FonsecaCinthia Silva

Private Wealth GroupHeriberto AcevedoMaria TatisAna LoboGerman Chavez

THE BLUEPRINT FOR INFRASTRUCTURE IN COLOMBIAFor Colombian policymakers, improving the country’s infrastructure is at the top of the agenda. And while the administration’s current infrastructure program is promising, some have pointed to the challenges of executing a more interconnected

infrastructure in a country with such geographical diversity. In this month’s edition of LPEJ, we’re featuring an exclusive interview with the President of the National Infrastructure Agency, Luis Felipe Andrade. On page 4, Mr. Andrade discusses the new initiatives his agency is taking to streamline the bureaucracy and traverse the country’s diverse geography with new roads, railways, seaports and airports.

“This is the most ambitious program ever in Colombian history in terms of investment in this sector,” says Mr. Andrade. “And I do dare to say probably the largest single program that has been undertaken in Latin America in the sector.” In the ensuing pages you’ll also find interviews with

the CIO of AFP Profuturo, the Head of Private Equity at FUNCEF, the Global Deputy Private Equity Leader at EY and more. Don’t forget to sign up for free to receive our weekly newsletters and monthly magazines on www.lpej.org! Many thanks to all who joined me for an interview and I’ll look forward to speaking with you all again soon! My very best,

Seth Fraser

LPEJ.ORG / AUGUST 20142

The Latin Private Equity Journal (LPEJ) is a Latin Markets weekly newsletter and monthly publication featuring interviews with LPs, GPs, government officials and private equity thought leaders active in Latin America. Latin Markets is the world’s leading provider of Latin America focused investment forums, regional summits, and streamlined market intelligence. Our platform provides a comprehensive and fascinating perspective of the opportunities in this diverse and booming region.

© All LPEJ content is copywritten & owned solely by Latin Markets Brazil LLC.

To advertise in LPEJ, contact:seth.fraser@latinmarkets.org

Latin Markets, 10 W 37th Street 7th flr.New York, NY 10018

OTHER INTERVIEWS INCLUDE:

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Contents

Luis Fernando AndradePresident of the Colombia National Infrastructure Agency

Jorge NobreHead of Private Equity at FUNCEF

Pablo MedinaHead of Private Equity at Old Mutual - Colombia

Luis EduardoCEO and Chairmain at NSG

Moises MaciasInvestment Officer at Fondo de Fondos

Gustavo Sosa-RostanDirector of Investments and Risk Management at WK Kellogg Foundation

LPEJ.ORG / AUGUST 2014 3

6 Pedro Grados, CIO at AFP Profuturo

Ardian looking to Renewables and Infrastructure

Interview with Pedro Grados

18 Benoit Verbrugghe, Head of Private Equity at Ardian

Interview with EY

20 Mike Rogers, Global Deputy Private Equity Leader at EY

1. Give us some background on your role and the National Infrastructure Agency.

LFA: The National Infrastructure Agency (ANI) is an agency specializing in PPPs for the transportation sector. We define transportation as essentially roads, railways, ports and airports. Previously, Colombia had an agency called INCO (Institute of Concessions) that was created in 2002. In 2011, almost 10 years after being founded, it did not show the results that the government wanted. As a result, INCO was dismantled and ANI was created. ANI received the concession contracts that were previously managed by INCO. The essential difference between INCO and ANI is that there is a significant improvement in the organizational structure. In addition, governance at the board level ensures that decisions are made from a technical and economic perspective as opposed to, let’s say, politically inclined decisions.

2. Tell us about the agency’s current project of rebuilding Colombia’s infrastructure with PPPs and your goals for the project.

LFA: Colombia has quite a lot of experience with concessions, as PPPs used to be called. We started doing concessions in the transportation sector 20 years ago and as a result we manage about 90 PPP contracts in this agency. We supervise 26 in roads, two in railways, seven in airports and 55 in seaport terminals. So we have quite a bit of experience in doing concessions and PPPs and have been improving the regulatory framework. We passed two important laws in the past few years. One is the new PPP Law which essentially puts Colombia’s legislation on PPPs in line with international trends. Secondly, we passed the Infrastructure Law which is meant to remove some of the obstacles that we found in previous infrastructure projects especially as it relates to land acquisition, interference with public service networks like electricity networks or gas networks and environmental licensing. We’ve done quite a bit of work on the institutional side, both in improving the legal framework and in organizational strengthening to really step on the accelerator right now. This is the most ambitious program ever in Colombian history in terms of investment in this sector and I do dare to say probably the largest single program that has been undertaken in Latin America in the sector.

In roadways alone, we have a $25 billion program for essentially improving our national road system. In Colombia we have roads in 3 categories – the national roads, department or state roads and the municipal roads. So we act on the first ones, which are the roads with the most traffic that connect the biggest cities to each other and the cities to the ports. With this program we aim to really close the gap. Colombia is a very mountainous country. For that reason, many of our roads have narrow curves and steep inclines and the typical 40 ton truck is only able to have an average speed of 30 to 40 kilometers per hour. That takes a lot away from competitiveness in

THE BLUEPRINT FOR INFRASTRUCTURE IN COLOMBIALPEJ Interviews Luis Fernando Andrade, President of the Colombia National Infrastructure Agency

the country and raises costs. Our objective is to have the most important 12,000 kilometers in the country in technical specifications that allows for trucks to travel at an average speed between 60 and 80 kilometers per hour. This requires, obviously, building additional lanes in places where there’s a lot of traffic, but also building tunnels and long bridges because of the mountainous terrain. That’s why it’s so expensive. So we divided the program in 40 projects and we’re in the process of awarding these projects through bidding processes. We expect to have many of the largest international investors participate in this process.

3. What type of interest are you seeing for these projects from international firms?

LFA: We have received offers in the first round of projects that we launched and in those we have 15 Colombian companies and eight international companies participating. Now, these eight companies are some of the largest developers in Latin America and from around the world. They include for example four of the large developers from Spain: the ACS Group, the FCC Group, OHL and Ortiz. We also have ICA, the largest company from Mexico, Motta Engil, the largest company from Portugal, Shikun & Binui, the largest company from Israel, and MECO, the largest company from Costa Rica. For just having started we had a good showing, but we expect that as we bring more projects to market we’ll get more participation from foreign companies.

4. Can you discuss how the energy sector has improved in recent years and how this has affected the overall infrastructure?

LFA: The development of the oil industry in Colombia has been quite significant over the last decade. Colombia is, I believe, one of the most dynamic countries in Latin America in terms of value exploration, and a lot of it is driven by the private sector. The country is concentrating on building more pipelines to make sure that we get enough capacity to transport oil, but given the geographic diversity we still move quite a bit of oil by truck, approximately 100,000 barrels per day. So clearly, the improvement of our roads is crucial in being able to handle this. We are also building seaports that specialize on oil exports. Terminals are increasing capacity and we have some new terminals such as the one being built by Pacific Infrastructure in Cartagena. We expect more to be built. For example, we’re in the process of approving

two PPPs right now. One is for exporting liquefied natural gas and the other one is for importing liquefied natural gas. We are also making improvements in our railway system, to have an alternative to the pipelines and to trucks. We expect that a significant percentage of what is moved today by truck could be moved by rail.

5. Where would you say is the most important area for Colombia to invest? Roads, rails, ports, airports or seaports?

LFA: The gap in terms of seaports and airports has been closed very effectively over the last five years or so through the use of PPPs. We’ve had very large expansions in our airports and seaports and we’re in the process of investing, but I don’t see those two areas as problem areas anymore. If you had asked me maybe five years ago if we would have problems in airports and ports, I would have said yes. If you ask me today, I would say, we still have to make some improvements, but the dynamics of private investments are such that I’m confident that we’re marching along in the right direction. Our real gaps today are in roads and railways. That’s why we’re focusing so much on our new road concession program because roads are vital to the economy. If you travel from place A to place B, you have to go at 30 to 40 kilometers an hour and you have a high probability of an accident. It’s quite different from being able to go at 80 kilometers an hour in a safe environment. In railways, we used to have a functioning rail network back in the 1950s – 1960s, but it was run by a state-owned company. It wasn’t run very efficiently and eventually the company went bankrupt and since then we’re only operating about 500 kilometers of railways out of 3,500 kilometers. Our challenge is to put back into operation with improved specifications the most important railway lines — those that are the cheapest to fix and that naturally tend to carry most volume. We’re working right now on improving 1,000 kilometers of railway lines and we think that with that improvement we’ll have a significant impact on cost reduction by creating competition between trucks and railways.

6. What can the country do to avoid bottlenecks and slowdowns in construction going forward?

LFA: If you look back at our projects, we have a large pipeline of projects that are being executed right now. We have faced difficulties in land acquisition, in interference with public networks and in environmental licenses. That’s where we tended to have most of the delays. That’s why we passed a new law that essentially

removes those bottlenecks. For example, on land acquisition the new law says that the government must be awarded the land at the start of the expropriation process. The judge has to give us the land within 30 days. Now, the trial as to how much we need to pay the counterparty could last a year, but the judge has to give us the land at the beginning of the process. We’ve already tested the law this year, and it’s working well. The judges are applying it. So, we don’t foresee significant problems in land acquisition anymore. Even the fact that expropriation works so fast will encourage people to reach voluntary agreements sooner.We used to also have problems with the public service networks that were built along the roads, such as the electricity lines or water lines or gas lines. It wasn’t really clear in previous legislation who had to move and who had to pay. As a result, we used to get into disputes with the utility companies to force them to move their network. Now with the new law, the responsibilities are crystal clear and we should expect no problems. Essentially, what the law says is that whoever got there first has the right to be there and whoever got there last has to move. So if I build the road first and that creates a corridor convenient for installing electricity, and the electricity company comes afterwards and uses my corridor, and I need to expand the road, the electricity company needs to move at its expense. Finally, we streamlined the requirements for environmental licenses in our projects which we hope will reduce some of the bureaucracy and delays associated with the licensing process.

7. What do you find valuable about attending Latin Markets’ Private Equity events?

LFA: This infrastructure program offers a significant opportunity for private equity firms. Our projects require tapproximately 20 to 25 percent in equity. The rest is debt. So, we’ll need $5 billion to $6 billion in equity for our projects. Of course, most of this will come from developers, but we also need equity from other sources such as private equity funds specialized in infrastructure. Private Equity funds look at it on a seven to 10 year investment horizon. They can be involved in the construction phase which is the riskiest and in the first few years of operation while the cash flows stabilize. Then they typically sell to investors with a lower risk profile such as pension funds. This creates very interesting opportunities for double digit returns in that period.

Mr. Andrade will be speaking on the panel “Industrial Strength: Infrastructure and Oil & Gas as Pivotal Investments of the Region” at the Private Equity Andean Forum on October 2, 2014.

LPEJ.ORG / AUGUST 2014 5

LPEJ AUGUST 2014: Colombia National Infrastructure Agency

LPEJ.ORG / AUGUST 20146

LPEJ AUGUST 2014: AFP Profuturo

3. Do you see your firm increasing your allocation to private equity?

PG: I really believe that during the next two years we are going to increase our investments in private equity in a very rapid way because there is now a very important change in the Peruvian pension system regulation. We are going to increase our limits in alternatives in general, but mainly in private equity. In the case of alternatives, we would be able to invest up to 15 percent of our total AUM. So, the overall industry is going to grow its allocation to Alternatives from $2 billion to $5 billion. We are going to see a significant increase in our allocation to private equity.

4. More broadly, what is your take on investing in emerging markets and Latin America going forward?

PG: Due to international financial events during last year, capital flowed from emerging markets to developed markets, mainly the United States. There has been a significant movement in the exchange rate especially

believe that the quality of our portfolios has improved and offers a high-quality risk-adjusted return for our clients.

2. What has been your experience investing in private equity?

PG: In the case of private equity, we have been investing in this asset class since 2005. At the beginning, we invested only in Peruvian private equity firms and then, in line with the increase in the legal limits to invest abroad, we began investing in international funds in 2008 – 2009. We started investing mainly in private equity fund of funds because it was a way to learn about the asset class. We generated a strong relationship with funds and the idea was to enter this learning curve. We also invest in real estate and infrastructure funds. Our experience has been positive in general terms as we have found excellent local and international teams in which to invest. However, it is still too early to talk about returns but we expect them in the coming years.

1. Give us a brief background on your firm and your experience investing abroad.

PG: Profuturo is a Peruvian private pension fund that belongs to the Canadian Group Scotiabank. We manage more than $10 billion out of an industry which in total manages $40 billion. So we have more or less 25 percent of the market in Peru and have been in operation since 1993. It’s a relatively new system. We compete with the system that belongs to the state. About our investments, at the beginning we invested only in Peru, and around 10 years ago we began investing outside the country. As of July, we were allowed to invest up to 40 percent abroad. Currently, we invest around 38 percent of assets outside of the country. Our experience investing abroad has been very positive. Thus we have been able to diversify our portfolio broadly in terms of country, region and sector allocation. Furthermore, we were very active in alternative investments such as private equity, infrastructure among others. Our goal is to construct a portfolio as diversified as possible and the international markets provide us new opportunities. We

Pedro Grados Chief Investment Officer at AFP Profuturo

LPEJ Interviews

in Latin American countries. The most important aspect is that in Peru we really believe in an open market. I truly believe that if we maintain macroeconomic stability we’re going to have some flow of capital from the emerging markets to developed market. In the long term if the region has social and political stability, we are going to have a very important flow of capital to emerging markets, Latin America and Peru in particular. The thesis of investing in Latin America starts with a growing middle class. This is not a fairy tale. It is real. So, there is

an enormous economic opportunity if we decrease poverty, and work together with the Peruvian Government to improve the social and political conditions.

5. What sectors and cities are you targeting for your PE investments?

PG: Our mandate is to invest globally. There are not specific cities in which we target our PE investments. Rather, we prefer to diversify risk by investing in entire regions in which managers have developed an expertise. Likewise, when we select a team, we prefer those GPs who have developed an edge in a particular set of industries so that they can execute the necessary operational changes in firms to truly generate outsized returns. Overall, we invest in Private Equity funds in general and also in Real Estate and Infrastructure funds.

6. What type of PE strategies does your firm prefer?

PG: We prefer to invest in funds that take control because that is how, we think, returns can be generated. It comes down to a change in the culture of a company, the change from a family company to an open company. Additionally, we also believe in growth equity strategies because in Peru in particular, we have a lot of family companies that were used to be part of a closed market, and there was a lot of distortion. If we invest, we really believe that we are going to have a very important growth in the value of the company, in the value of the equity.

7. Which regions and sectors have you invested in abroad?

PG: We are global investors and our portfolio is a testament to that approach. Geographically, we are limited partners in funds located in developed and emerging markets. We do not have a sector allocation for funds but rather we invest by strategy. So, we are investors in fund of funds, growth and LBO funds, real estate and infrastructure

funds. Due to legal limits to invest abroad we have a significant proportion of our PE AUM invested locally. However, due to recent changes in regulation, we expect to increase our PE allocation abroad in the coming years.

8. What advantages do you find attending Latin Markets’ Private Equity events?

PG: These events provide us a venue to connect not only with funds but also with like-minded Limited Partners. We find opportunities to interact, exchanging experiences and ideas that benefit our investment processes. Also, we gain a number of contacts with private equity firms and through one-on-one interviews we diligence them.

Mr. Grados spoke on the “Andean Limited Partner

Roundtable” at the Private Equity Latin America

Forum on May 19-20, 2014.

LPEJ AUGUST 2014: AFP Profuturo

LPEJ.ORG / AUGUST 2014 7

“During the next two years we are going to increase our investments

in private equity.”

LPEJ.ORG / AUGUST 20148

Telecom and Energy in Mexico

LPEJ AUGUST 2014: Fondo de Fondos

INTERVIEW WITH MOISES MACIASInvestment Officer at Fondo de Fondos

5. What type of private equity strategies do you employ in Mexico?

MM: We mainly invest in growth capital funds. The strategies used to create value in the portfolio companies are different for each funds but include buy-and-build, organic growth, governance institutionalization, relatively low- leveraged buy-out, management buy-in, sectorial expansion, vertical integration, etc.Also, we invest in infrastructure funds that use project financing schemes, real estate funds using specific financing structure for each project and mezzanine funds investing in subordinated debt or quasi equity, in companies or in infrastructure projects.

6. Do some of the companies you invest in tend to be family-owned enterprises?

MM: The majority of the companies the funds invest in are family-owned companies. There are some cases in which SMEs, after working alongside with a fund of our portfolio for three or four years, they became large companies and in some cases they went public. We also have had experiences with small companies in the technology sector that are not institutionalized, yet they have a good product and after a time with a fund are acquired by an international company at very high multiples.

7. What advantages do you find attending Latin Markets’ events?

MM: It is truly rewarding. Latin Markets events are characterized by the high quality of attendees and speakers, a very good organization that includes topics of real interest for PE players. In our experience, we have built valuable business relationships after attending these events.

3. How do you see the reforms in energy and telecommunications materializing in Mexico and have you seen the benefits of them yet?

MM: : Mexican government is driving a number of reforms that will have a positive impact in the economy in the near future, as well as building strong macroeconomic conditions for a long term sustainable growth. Energy reform represents the biggest opportunity since it opens the energy sector to private investments and should drive interests from international investors. Both the investments attracted by the reform and the $600 billon of the National Infrastructure Plan to be invested by the Mexican government in the energy sector will position Mexico as one of the top global producers of oil & gas, with many opportunities in related industries. The telecommunications reform will provide social and economic benefits, thanks to an increase in the competition landscape and the entry of new players in the industry. Although benefits of all reforms are not immediate, we have seen our pipeline strengthening in energy-related-sectors.

4. What is your take on the overall private equity opportunity set right now in Mexico?

MM: It’s huge. I would say that not only because of the reforms, but also because Mexico has strong economic fundamentals, a stable political environment, appropriate socio-demographic conditions and geographical advantages. When you compare Mexico with its peers, it has a strong domestic market, a growing middle class, a high level of education, a constant growth of the per capita income and a demographic bonus for the next decades. I would like to point out that in our view, the main opportunity for fund managers is in the mid-size markets, with funds that invest tickets from $10 million to $30 million, there is a large number of companies in that spectrum with high growth potential.

1. Give us a brief background on your firm and your experience investing in private equity.

MM: Fondo de Fondos (FdeF) is a private equity fund of funds which was incorporated in 2006 by four Mexican development banks. Since that time, FdeF has raised capital commitments from other national and regional institutional investors. Also, we are in a fundraising process with Mexican Pension Funds. As of today, FdeF manages capital commitments of more than $730 million in 68 private equity funds, with Mexico-exclusive and LatAm-inclusive investment theses, as well as 6 direct co-investments in Mexico.

2. You mentioned some of your potential investors are pension funds and development banks. How much of a mandate is there to invest in more sustainable types of sectors and industries in Mexico?

MM: Nacional Financiera, which is our main investor, is highly committed to the PE industry in Mexico, not only investing, but also supporting various activities (from changes in the regulation to industry events) in order to make up a better business environment for private equity in the country. However, we also raise money from pension funds. Mexican Pension Funds (Afores) are by far the most important investors in Mexico and they have proven special interest in the PE Industry investing more than $5 billion through CKDs (Mexican public trust) to date. Our mandate is to achieve attractive risk-adjusted returns for investors through a diversified portfolio. Thus, we invest at least 50 percent of our resources to growth strategies, no more than 20 percent to infrastructure, no more than 10 percent in real estate and no more than 15 percent in venture capital. We also fixed a limit of 20 percent for direct co-investments.

LPEJ.ORG / AUGUST 2014 9

1. Give us a brief background on your firm and career experience in private equity.

PM: Skandia in Colombia is owned by Old Mutual in South Africa – one of the biggest asset managers in the world. We report to them. Here in Colombia specifically our group is comprised of four companies: Pensions, Trust, Life Insurance and Brokerage. Across these three companies we manage something close to $8 billion, which are invested along different mandates. Our largest portfolio is one of the mandatory pension fund portfolios which is $3 billion. That portfolio is the one that invests in private equity, more or less 10 percent of that amount. So it’s around $300 million.

I joined five years ago as the Financial Risk Director. I have been in charge of analyzing risk aspects of the private equity opportunities. The scope of the due diligence has been growing with time, as we gain more experience and knowledge. In general the main phases of this due diligence include: i) Legal admissibility, ii) GP experience and market recognition, iii) GP track record, iv) match between GP investment thesis and portfolio needs.

2. Where are you looking at domestically and internationally for private equity investments? Which sectors?

PM: Domestically we are looking in the entire scope of Private Equity. Though, we are concentrated in three main sector/strategies: i) Infrastructure, ii) Real Estate and iii) Buyouts.

Internationally we have been concentrated in primary middle market funds focused in the US. We are now starting to analyze opportunities in Europe.

3. What type of private equity strategies do you typically employ?

PM: Our program started five years ago. We started developing our program investing in big well known houses. Domestically, since the supply was just emerging, we invested in the few opportunities that opened at the moment. Today, we are pickier, targeting mainly primary funds in specific sectors and geographies.

4. What is your take on the talent of managers right now in Colombia?

PM: It is still an emerging industry in Colombia. Therefore the talent is still migrating from other industries to private equity. Nonetheless, there are success stories that probably will keep on this right track.

5. What is your take on the opportunity set for private equity right now in Colombia? What economic dynamics are advantageous?

PM: As for the investment opportunities I think there is an interesting opportunity in the infrastructure sector, as the country needs it. The government is supporting programs to expand it and has a good acceptance by the general population. As for investment opportunities in other sector, the majority of resources have been diverted to real estate related investment. Probably, investments will be directed to more industry/entrepreneurial initiatives once the supply side is more “educated” in reference to the dynamics of this industry and therefore more willing to take risks.

6. What advantages do you find attending Latin Markets’ Private Equity forums?

PM: It is a very helpful space to realize how other colleagues and clients are approaching the investment decision process in private equity. This sharing of information is especially important in this industry since there is not yet an academic accepted standard on how to take this type of investment decisions.

Mr. Medina spoke on the “Andean Limited Partner

Roundtable” at the Private Equity Latin America

Forum on May 19-20, 2014.

LPEJ AUGUST 2014: Old Mutual

LPEJ INTERVIEWS PABLO MEDINAHead of Private Equity at Old Mutual - Colombia

INTERVIEW WITH JORGE NOBREHead of Private Equity at FUNCEF

IT, LOGISTICS AND OIL & GASIN BRAZIL

LPEJ.ORG / AUGUST 2014 11

1. Give us a brief background on your firm and your role.

JN: FUNCEF started in 1977. Today we have 135,000 participants. Our assets under management are 52 billion Reais. We invest in real estate, private equity, fixed income, corporate credit and the stock markets. We started investing in private equity in

2004 with two funds and now we have 50 funds in our strategy. We invest by funds and directly. We have 5 billion Reais in committed capital in those strategies. We want to reach this allocation to 16 percent until 2018. Today, it is 10 percent. We plan to invest around 250 million Reais this year.

2. How often do you invest in funds versus directly?

JN: Our main strategy is to invest by funds. We only invest directly in very strategic projects. For example, last year we invested in four funds – two IT funds and two infrastructure funds, amounting 400 million Reais. In the directly strategy we invested in just one company of industrial sanitation, but in higher volumes of money (300 million Reais). Another strategic direct investment was in 2011 when we invested more than 1 billion Reais in a drilling ship company. In the other hand, we invest by funds every year.

3. What is your take on the opportunity set right now in Brazil given lower GDP growth?

JN: We selected three main investments thesis. The first is to invest in sectors where Brazil has bottlenecks such as infrastructure and education. IT is a bottleneck for companies in Brazil as well. We like logistics generally speaking. We invested last year in a sanitation company. We also invested in three funds of oil & gas. We have a drilling ship company and a shipyard company. So, we see a lot of opportunities to increase the Brazilian productivity investing in

those sectors. In addition, infrastructure investments have long-term contracts, many indexed to inflation, matching the profile of the foundation liability.

The other strategy is to invest in leading companies, but in sectors that have low penetration in the economy with a huge space to consolidate. There are leading companies

with only 10 percent of its market share. We see very good opportunities in some niche retail companies. We see a momentary slowdown in retail masses. But there are specific segments that deserve attention and which continue to grow at high rates. The insurance sector is another example of low penetration in Brazil economy.

The third strategy is to invest in sectors that Brazil has natural advantages like agribusiness. Brazil has plenty of land still available and cheap, good sunlight as well as many minerals throughout the territory. We have investments in El Dorado. It’s one of the biggest pulp and paper companies in the world. We see good investment opportunities in the value chain in the food segment as well.

4. How do you see things progressing now that the World Cup is over and elections are coming up in Brazil?

JN: We hosted a great World Cup. I think our image has been internationally appreciated. We leave as legacies of this event not only the possibility of attract tourists, but also new investment to Brazil. At FUNCEF we see that opportunities continue to appear as foreign investors talk to us about investment opportunities. Regarding the elections, our democracy is stable. The main candidates are extremely qualified to do a good government. I see that confidence in our country will gradually return after the election results.

5. What is your timeline for starting to make investments abroad?

JN: The first step of investing abroad shall occur in the public equity market. But the private equity should come soon after. For this, we are already searching better know who are the main International GP, how are their processes, their track records, their expertise.

We already started to design how we will select such managers. Although we are in an incipient stage, investing abroad is in our strategy. We want to iterate more with this new ecosystem.

6. What advantages did you find attending the Private Equity Latin America Forum?

JN: The event by itself is great to know what others GP and LP think about strategies, macroeconomics vision among other topics. Additionally, it was very helpful to meet new GP and LP in just two days. The event opened up a range of investment opportunities that had not yet been in contact, whether in NY, either in Brazil or in another country.

Mr. Nobre spoke on the panel “Exploring the Brazilian

Pension Landscape” at the Private Equity Latin

America Forum on May 19-20, 2014.

LPEJ AUGUST 2014: FUNCEF

“We hosted a great World Cup. I think our image has been internationally appreciated.”

October 2, 2014Cartagena, Colombia

Herman B. Santos

Chairman - Board of Investments

Los Angeles County Employees Retirement

Association (US)

Chief Risk Manager

AFP Skandia (Colombia)

Head of Alternative Investments

Seguros Bolivar (Colombia)

Strategy ManagerAFP Colfondos

(Colombia)

Chief Investment Officer

Metlife Colombia (Colombia)

Chief Investment Officer

AFP Integra (Peru)

Chief Investment Officer

Profuturo AFP (Peru)

Principal Investment Officer

International Finance Corporation (US)

Pablo Medina

Paula Delgadillo

Alfonso Vargas

Oscar Rocha

Renzo Castellano

Vicente Tuesta

Katherine Downs

2014 Sponsors

2014 Featured Speakers

Register at:

www.latinmarkets.orgFor more information, contact:Charles FathersT: +1-212-696-0898charles.fathers@latinmarkets.org

PRIVATE EQUITY ANDEAN FORUMThe Private Equity Andean Forum will bring together 300+ local and global institutional investor, funds and advisors for one day of informative discussion and networking that offers local firms access to the global private equity industry and serves as the perfect cornerstone to any international due diligence trip to the region.

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1. What has been your main area of expertise for the past few years?

GSR: At Mercer, I am the Business Leader for Retirement and M&A Services for the Andean, Central America and Caribbean Area Market. For the past 18 years I have been working on management of social security systems – mandatory and supplementary pension systems - and HR-related issues. Before working at Mercer, I worked as General Coordinator for Colombia and the Andean Region of the Ibero-American Social Security Organization (OISS), and before that I was Advisor of the Secretary of Social Security of Argentina (ANSES). I have also been involved elaborating drafts of legislation regarding pension issues and bilateral and multilateral pension reciprocity instruments.

2. How is your team comprised across groups?

GSR: Mercer Colombia works as a hub retirement and M&A related issues for the Andean, Central America and Caribbean regions. Most services are delivered in Colombia, Venezuela, Panama and Peru. Our Bogotá team has 12 people, from very diverse cultures i.e. Colombians, Americans, Argentinians and Canadians, with different areas of expertise and abilities. They all get involved in different kind of projects including traditional actuarial valuations, M&A, consulting, plan management, sales, business development, product development, etc…and lately investment services.

M & A in the Andean

LPEJ.ORG / AUGUST 201414

LPEJ AUGUST 2014: Mercer

LPEJ Interviews Gustavo Sosa-Rostan Director of Retirement and M&A Services for Andean, Central America & Caribbean Market at Mercer

7. Where have you seen the most opportunities for wealth services?

GSR: We see opportunities in employee communications around financial education, which is aligned with governments such as Colombia where they have recently created initiatives to increase financial education.

8. Why do you think international investors are becoming more interested in the region?

GSR: Due to the low rates of return in more mature markets such as Europe and the US, the returns in the Andean markets are more attractive. Most countries in the region have been going through periods of steady growth and political stability. Colombia, Peru and Panama all have experienced GDP growth rates over 4.3 percent during 2012 and 2013, and are expected to grow over 4.5 percent for 2014. These countries have also maintained low inflation during the same period, thus providing an economically stable environment for investment. Moreover, both Colombia and Panama have become regional hubs for many international companies that choose to locate their regional office in these countries.

9. What advantages have you found attending Latin Markets events?

GSR: Latin Markets events are great because they create a wonderful space to exchange ideas and where attendees can share experiences, receive updates on regional trends, develop their network and do businesses, of course.

Mr. Sosa-Rostan will be speaking on the panel

“Regional Regulatory Update” at the Private

Equity Andean Forum on October 2, 2014.

5. What do the recent regulatory changes in the Chilean, Colombian and Peruvian markets mean for groups looking to raise or allocate capital?

GSR: There are a number of changes occurring in the regulatory landscape of these counties. While Chile has the most formalized regulatory system of the three, all are moving forward with the adoption of international accounting standards, the formalization of financial controls, social security coverage for a greater percentage of the population, and implementing rules for increased transparency in financial transactions and the allocation of resources within pension funds. Also, in each country there are policies designed to attract investment and provide security through the promotion of economic stability.

If we take Peru as an example in the region, the Peruvian prudent fiscal and monetary policies have also led to low inflation rates, making it competitive in attracting foreign investment, with good deals to be found in the mining, oil and gas, and fishing industries.

At the same time, more Peruvian companies are looking outbound, domestic companies looking at outbound growth include Grupo Brescia, Grupo Gloria, Grana y Montero and mining companies such as AIM-listed Hochschild, among others. This kind of situation is the trend in the majority of the countries of this region.

6. Where have you seen private equity increase and become more utilized the most in Latin American pension fund allocations?

GSR: A larger occurrence of PE and M&A activity has been observed in Colombia. Most recent large acquisitions have been through private equities, such as purchase of utility companies. Another trend within the region is that governments continue to privatize some state-owned companies and it is an opportunity for PE investments. Very few companies have pension funds, however the global trend has been to increase allocation to invest in PE and other alternative investments.

We have a very strong understanding of statutory and other types of benefit plans within the region as well as the functioning of regional economies. We help our clients investigate and value the labor liabilities that a target company may have, which often results in an adjustment to the price they pay for a new company. We also study potential HR risks and make recommendations on how to mitigate them. But Mercer M&A is a cross line of business services where we support our clients (Corporate or PE) through the whole process, from strategy planning to long-term Integration, in all issues related to HR (soft and hard subjects), with a focus on aligning the business strategy with the HR Strategy.

3. How has the concept of “retirement” evolved from classic retirement services to wealth services?

GSR: We have gone from performing traditional actuarial valuations of defined benefit pension plans to designing and implementing savings and defined contribution plans. We have broadened the scope of the studies we make for our clients to include risk assessment, mapping and management. We are also looking forward to offering additional assistance with investment solutions, in particular for our clients that hold pension assets. 4. How has managing pension liabilities changed over time and in your view, how does this differ between countries in the Andean region?

GSR: Complementary pension plans are still not very prevalent in the region, except in certain sectors (e.g. Oil and Gas). A global trend in pension plan design is the transition from defined benefit to defined contribution plans which is aligned with the private companies’ desire to transfer pension liabilities to the employees instead of assuming them entirely. That global trend continues with the closing and termination of defined benefit plans as well as with pension buyouts by third parties such as insurance companies. As for the Andean region, Colombia has several types of pension liabilities, just as Chile has many labor liabilities not related to pensions. Peru is where the least amount of pension liabilities can be observed.

LPEJ.ORG / AUGUST 2014 15

LPEJ AUGUST 2014: Mercer

INTERVIEW WITH LUIS EDUARDOCEO and Chairman at NSG

BUY NOW, SELL IN 2017

LPEJ.ORG / AUGUST 2014 17

1. Give us a brief background on your firm and your career experience in private equity.

LE: NSG started in 2006 and it’s focused on entirely private equity, but we also manage other structured funds like debt funds or real estate funds. The first investment I made was as the CEO of the investment bank, Banco do Brasil. In 2003 we invested in an energy fund targeting projects of aeolic energy where small hydroelectric power plants and also sugarcane waste. The fund was very successful and it was the first time that Banco do Brasil invested in a private equity fund. Now we have roughly $2.7 billion.

2. How does your firm go about evaluating opportunities in Brazil right now?

LE: We first take a top down analysis where we analyze every industry and see which industries we believe are favorable. Second, we analyze the investment opportunities and try to figure out which companies will benefit from sector growth, and then it’s

usually through network. We try to talk with the owners to see if we can reach an agreement on their position in the company. We analyze not only the company itself but also if it’s in a position to grow.

3. What private equity strategies does your firm prefer?

LE: In some areas we have a buyout position. In other areas we have a minority position, but in both cases we have a very clear corporate governance policy on who should do what and decide on a minority to settle disagreements. We are able to enforce proper corporate governance and in almost all cases this proves to be very efficient in driving up revenue and profits.

4. What are you hearing from international investors when it comes to investing in Brazil?

LE: We are talking to the big law firms and the big auditing companies to help us set up an international fund. We believe we have some interesting opportunities in energy to be targeted for foreign investors. I also believe that Brazil needs a lot of energy and the government made some bad decisions in 2012 regarding its government-owned company. We believe that by the end of this year we will have this fund ready to launch and start fundraising. We have to prove that we have a compelling business opportunity and an interesting pipeline deal flow.

5. What is your timeline for making additional investments in 2014? What sectors are you targeting?

LE: We have invested in electric energy, but now it’s not as good anymore. About five years ago it was good. We also went into the retailing. It was good at the time and we are just selling our positions in retailing now. We are returning to infrastructure especially

on public transportation and because of the problems with public transportation in Brazil.We’ve reached a place where we are always allocating and raising funds at the same time. We raise 50 to 100 million Reais every month in new investment. We must distribute the assets.

6. In light of lower GDP growth now in Brazil, where are you finding private equity opportunities?

LE: One good thing is that the Real devalued in relation to the dollar. In dollar terms, it’s better to invest now than a couple years ago because of the exchange rate. Also, now you can buy companies at better multiples. Buy low and sell high, right? That’s a common sense strategy in the marketplace and to get some money. We

believe that now you have better opportunities to buy than in the past and as all economies have cycles, we believe that the next cycle will be a better moment to sell. We believe you have the investment window in the next five years. Now is a good moment to buy, but you have to be very, very careful what you buy.

7. What is your outlook for Brazil in the coming year given the elections coming up and the current macroeconomic scenario?

LE: Despite the government we still have a very good unemployment rate. I believe that President Dilma will be re-elected and she is saying that she will be more orthodox in the next government, looking more carefully at government spending, while trying to increase government investments in economic infrastructure. This year and next year the growth will not be very good but maybe in 2016 we can have some good growth. So, the moment to buy would be now and to sell in 2016 or ’17.

LPEJ AUGUST 2014: NSG

“In dollar terms, it’s better to invest now than a couple years ago because of

the exchange rate.”

LPEJ.ORG / AUGUST 201418

LPEJ AUGUST 2014: Ardian

1. Give us a brief background on your firm and your role at the firm.

BV: Today we are a global private markets manager with $47 billion across private equity, private debt, and infrastructure. Within private equity we have a $28 billion global fund of funds platform and $11 billion of direct investments that are focused mainly in Europe. In fund of funds, we are active as both a primary and secondary investor, with the latter providing liquidity to a global base of institutional investors like pensions, sovereign wealth funds, endowments, etc. We just raised a fund of $9 billion for this purpose. Like our direct private equity, Ardian’s private debt and infrastructure businesses are European centric, each managing $4 billion. We are 320 people globally worldwide. Our company completed a management-led buyout last year and rebranded as Ardian. Today, the management and the employees are majority shareholder of the company and we are excited for this new chapter with a new name.

I joined Ardian in 1999. I started in Paris, working in the fund of funds business, where I was in charge of the US markets starting in 2007. I then became Head of the New York office in 2010 and subsequently a member of Ardian’s Executive Board, leading the US operations and investment activities.

2. What is your current experience investing in Latin America?

Ardian Looking to Renewables and InfrastructureLPEJ Interviews Benoit Verbrugghe Head of Private Equity at Ardian

BV: In general, we are cautious on developing markets. Historically, our focus has been in Asia, where we have had a physical presence since 2005. As of today, we have not yet invested heavily in Latin America. In fund of funds, Ardian has a portfolio of more than 900 funds in the world, and as part of this activity, especially in secondaries, we have been able to buy interest in funds like Southern Cross, Advent Latin America, GP Investments and others. This is a good way for us to learn about the managers and markets in order to potentially reinforce our position through future primary commitments. In terms of

direct activity, we are not making platform investments in the region. Instead, Latin America primarily represents an expansion opportunity for our European companies. Across the direct portfolio, our companies operate production facilities in Brazil, Chile and Argentina and have completed a few small build-ups in Brazil, which is a key geography in the value creation plan for several of our companies, particularly in healthcare and a niche segment of the services sector.

3. What type of advantages does your firm’s platform provide for international investors?

BV: We have a global LP base, which has been growing recently in Latin America, where we have had success attracting investors from countries like Chile and Colombia. Looking ahead, we hope to continue this success by developing relationships with LPs across Latin America.

If investors are looking for a fund of funds program in Europe, the US or Asia, we have the expertise. If they are looking for direct exposure in Europe through buyouts, private debt, infrastructure, we are a leader in these markets. Our platform allows

for LPs to gain access to private equity, private debt, and infrastructure through a single relationship. Most of our LPs take advantage of this feature by investing in multiple funds across the platform.

4. Where are you finding new opportunities in the region?

BV: Our fund of funds activity in the region is to actively acquire secondary positions in existing funds as mentioned above. From the direct investment standpoint, we see potentially our first platform investment in Latin America through the

infrastructure channel. We have $4 billion under management through dedicated European infrastructure funds and we’ve had quite a bit of success and experience in the renewable energy sector. We see opportunities today in Latin America to work with some of our industrial partners with whom we have worked in Europe, and these are global players, to building some interesting renewable energy platforms in Latin America. Recently we’ve looked at opportunities for both solar and wind in Chile, and we see some interesting opportunities in Brazil as well. If completed, these investments will be made through a small dedicated fund that has a global scope as opposed to being a European product. It’s a new initiative for us but it has a defined allocation that will be in Latin America. And so, that is most likely going to be our first entry point for the direct platform investments in the region. Otherwise, our buyout team and portfolio companies are actively reviewing specific build-ups in Brazil.

5. What is your timeline for making additional investments in the region?

BV: As mentioned, Latin America is a key component of the growth story for several direct investments in our portfolio. In that regard, the timeline for build-ups and

related expansion in the region is now. On the renewables side, we will be cautious, but could make our first investment in the mid-term through our global fund. For fund of funds, we expect to remain opportunistic around secondary opportunities, particularly as the market continues to mature.

6. What advantages do you find attending Latin Markets’ private equity events?

BV: This is our second time participating. They do a nice job at bringing together a strong mix of local and international managers and LPs. For us, it’s educational and about meeting the investors in the region and also with managers and local partners.

Mr. Verbrugghe’s colleague Michael Bane

moderated the panel “Exploring the Brazilian

Pension Landscape” at the Private Equity Latin

America Forum on May 19-20, 2014.

LPEJ AUGUST 2014: Ardian

LPEJ.ORG / AUGUST 2014 19

“Recently we’ve looked at opportunities for both solar and

wind in Chile.”

LPEJ.ORG / AUGUST 201420

LPEJ AUGUST 2014: EY

because the mere hint of a tapering of policies here in the US set a pretty strong ripple effect into the emerging markets and roiled their currencies. So I think what happened initially was a knee jerk reaction in the publicly traded markets. I was just down in Brazil last week and they are much slower than they were a year or two ago and a lot of that is a function of the macroeconomic policy changes and things that are going on in many of the developed market economies. Government policies are also having a real impact on those economies in the short run.

As you’ll note, I mentioned mostly the public market capital flows because those are more liquid. You can literally call up and move your money across borders quickly. The longer term issue though, which many people are going to keep on their horizon, is the fact that many of the macroeconomic and demographic trends that many folks have identified are still in place in these emerging markets. The average age in the US, for example, is roughly 36 years old. The average age in Africa is about 18, and so as you see these economies continue to build and grow, the long-term trend of consumerism, the need for financial services

strategy.

We’re now seeing many of those firms step up and begin to think more seriously about how they take advantage of opportunities and participate in deal activity in Asia-Pac, certainly in China and some of the Indonesian markets that are growing and have nice opportunities. There are also the funds in Latin America and Africa where we see a tremendous amount of growing interest. What we do is provide, assurance or audit services, tax advisory capabilities and also transaction advice and analysis on a global basis for these funds. We hope to do so more on a global basis as they move around the world. As they go into these new markets they quickly realize they need help and look to us to provide those types of capabilities seamlessly around the world wherever they choose to pursue.

2. What are you hearing from international investors when it comes to their appetite for investing in emerging markets and Latin America?

MR: It could be the critical question of the year really in terms of emerging markets

1. Give us a brief background on how EY works with funds and investors in emerging markets and Latin America.

MR: There has been a steady migration towards emerging markets for investors. If you go back to say 1995 or so, three to five percent of all private equity capital was invested in the emerging markets. That number is up to around 13 to 14 percent as of today and we only see that growing as firms continue build out their networks. This is not only the existing funds that are available that are currently in the large cap funds -- they’ll be growing their footprint. There will be new and emerging funds that will play a more active role in some of the emerging markets. There’s certainly a very strong and numerous network of funds that have a local specific geographic focus or maybe a specific emerging markets focus. We see many of those beginning to rise up and become global players especially on the emerging market side. Our main strategy is to help our clients move into emerging markets. Most of our funds we deal with these days, if you go back several years, didn’t really have a China or Latin American strategy, certainly not an African

INTERVIEW WITH MIKE ROGERSGlobal Deputy Private Equity Leader at EY

and infrastructure is still there.

Everybody went running and now many of them are coming back. We see a long-term trend that is just undeniable. When you have demographic changes -- these are major, major moves that really can’t be undone overnight or very quickly and so as these economies continue to build middle class they will demand services, consumer products, and things of that nature. Our view is that it is more of a pause and, in fact, we wrote a piece a called our 2013 Global PE Watch on this topic. If you go back three or four years, there was a period of time where people thought the answer to every question was going to emerging markets. Just because the US and the old western economies had slowed so much post-crisis

there was a feeling as if you had really no choice. If you were trying to pursue a growth strategy, you had to go to emerging markets. There was a lot of money flooding in. So, in some ways this may be a healthy pause and just get people to reflect and see what their overall objectives were in the first place. We think those trend lines are still in place. We do not believe it’s a major shift away from emerging markets right now.

3. What is your take on the PE opportunity set right now in Brazil? Are you seeing more capital flowing into the Andean?

MR: The big deals were of course initially done in Brazil. This had to do with the size of companies and market share and scale. There was a period where too much capital was chasing too few deals in Brazil. The competition got a little bit too heated and so there weren’t as many attractive opportunities as there once were. At the same time the advent of the Pacific Alliance and the fact that you’ve got countries like Colombia, Mexico and Peru all reducing trade barriers – this makes it easier for capital to flow across borders, making it easier for businesses to operate on a pan-regional basis. Of course everybody wants

to hear about Brazil because it’s one of the BRIC nations, and given the size.

But we actually get more questions these days about Colombia and Mexico. I spoke at a conference recently and I asked folks where they’d invest their next dollars of capital. Three of the five said Latin America and they were not countries you would not put as first choices. Colombia and Peru were where people thought there was going to be an emerging opportunity over time. I was down in Colombia earlier this year. I think they are very serious about trying to attract capital to try and make their businesses more international. They certainly appreciate the fact that they’re very well positioned in the Pacific Alliance. They feel the confidence with their domestic situation

under control.

There are a lot of very, very positive things right now for Colombia, and I think it moves on naturally to Mexico. I was in Mexico in January and they are very bullish as well. They are still struggling with some of the issues around security and the drug trade and things of that nature, but they feel like they are on an upswing as well and it’s a big economy. If they can position themselves correctly, I think they could do very, very well. There’s a lot of interest in Mexico these days.

4. You mentioned scale when it comes to the Andean countries. How has this played a role when it comes to international investments in the region?

MR: The bigger funds that are moving into the market like to seek entities with higher entry EBITDA values and entry values because it’s just hard for them to place their money into deals at small little pieces at a time. So, they are looking for larger deals.

One of the things that we cited in our last Latin America exit study is the development of a two tiered market in which there are a

lot of local funds and regional funds that are doing very well in terms of making initial investments into many of the family-owned businesses. Some of these smaller regional funds are having good success at going in and partnering with family ownership -- maybe making a few operational changes, maybe looking to professionalize the finance side of the business and ultimately improve it as much as they can before it needs to go to the next level. That’s where we’re seeing some of the bigger funds come in at that level and sort of step in and play that next investor role where they have the ability to bring more capital to bear or possibly help with value creation concepts that may or may not have been pursued under the previous management or quite they bring in contacts, personnel or more

importantly new revenue sources such as internationalizing the business to allow for greater exports.

Things of that nature and this two tiered model -- we really see that as sort of taking good shape in Latin America because in some cases the companies they have good ideas, and well-established positions, but from a scale perspective they’re not quite ready for one of the bigger funds out there.

Mr. Rogers moderated the Keynote Conversation

“Examining the Global Political Landscape” at

the Private Equity Latin America Forum on May

19-20, 2014.

LPEJ AUGUST 2014: EY

LPEJ.ORG / AUGUST 2014 21

“Everybody went running and now many of them are coming back. We see a long-term trend that is just

undeniable.”