Macquarie Group is planning to launch a new infrastructure fund spanning key Latin American economies, as investors seek out higher yield in emerging markets.
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The head of Macquarie Funds, Shemara Wikramanayake, said on Tuesday she was excited about the potential of Latin America, and the bank was working with local partners to develop the fund.
It comes as investors seek out higher-yielding assets in emerging economies in an environment of record low interest rates.
''We are looking at trying to develop a pan-Latin American offer for our investors,'' she said at the Latin America Australia Investors Forum in Sydney. ''There’s improved stability in a lot of these markets over the last decade to decade-and-a-half.''
She said the bank was close to launching the fund, which would be a private unlisted infrastructure fund of a similar size to other offerings.
Mexico is Macquarie’s main base in the region, with 40 staff on the ground, and it is also looking at opportunities in Brazil and Chile.
Ms Wikramanayake said there was an ''infrastructure gap'' in transport, infrastructure and communications in many of the region’s markets.
Macquarie already has a $1 billion real estate investment trust in Mexico, and Ms Wikramanayake said its infrastructure in Mexico had five investments and those had returns in the ''mid teens''.
One of the country’s biggest infrastructure investors, Industry Funds Management, was also upbeat on the region’s potential.
Brett Himbury, chief executive of IFM investors, said there was ''a fair amount of upside,'' noting that pension funds were increasingly eyeing the region. IFM currently has hydro electricity assets in Chile and wind farms in Brazil.
Reserve Bank assistant governor Guy Debelle said Latin America accounted for about 2 per cent of overseas Australian investment and less than 0.5 per cent of Australian banks’ lending.
''Australia’s banking sector is not particularly engaged,'' Dr Debelle said. ''Capital flows are relatively low but with plenty of upside.''
Alongside the region’s potential, Ms Wikramanayake cautioned that it was still challenging to finance large deals in the region.
Mr Himbury also highlighted recent unfavourable tax changes in Chile, saying these threatened to send the wrong signal to investors.
