SEOUL, Korea--Mr. Erik Bethel, Managing Partner of SLIA, a private equity fund focused on acquiring Latin American natural resources companies with an eye on linking them to Asia, addressed the Private Equity International Global Alternative Investment Forum (PEI) held June 14, 2012 in Seoul, Korea.
“Broadly speaking, when large Asian pension funds and other institutional investors invest outside the region, they tend to be biased towards US and European funds,” explained Mr. Bethel. “Only 3% of Asian LP capital is committed to non-Asian Emerging Markets, which is too bad because Korean and Japanese investors are missing out on great growth opportunities.”
Mr. Bethel made the case that Korean investors should take note that Latin American economies are growing because of Asia. When Korean, Chinese and Japanese automotive companies sell a car or when White Goods Companies sell an appliance, everything that goes into that product is made from a commodity, including iron, aluminum, plastics and copper. “The problem,” notes Bethel, “is that there aren't enough of these natural resources in Asia. Therefore, Asia needs to source commodities from somewhere and Latin American countries such as Brazil, Peru and Chile are resource-rich.”
Bethel also pointed out that perhaps in the short-term, commodity prices may fall because of the fears surrounding Greece, Spain and other troubled EU countries. Despite this, notes Bethel, “Continued urbanization in China and India have far reaching implications, and this means that commodity prices will be buoyed by these factors in the longer-term. China still has roughly 700 million people living in rural areas and the country is experiencing a massive wave of urbanization, which means more houses, more cars, and more refrigerators. All of this is positive for iron ore producers, soybean companies and copper miners.”
Other factors that could affect commodities include macroeconomic policies in Europe and the US. “When the European Central Bank and U.S. Federal Reserve print excessive amounts of money, it creates inflation. The safest things for investors to hold in an inflationary environment are gold mines, soybean farms and other hard assets,” said Bethel.
Despite the discussion surrounding commodity prices, Bethel sought to explain that SLIA was investing in natural resource firms with solid fundamentals that transcended vicissitudes in the commodity cycle. “To be clear,” stated Bethel, “commodity prices are important, but they don't drive our investment strategy. SLIA invests in businesses run by goods managers who have the potential to make money despite the up and down movements in commodities. These companies have a sustainable competitive advantage which could include logistics, resource grades or favorable extraction costs.”
The Korean LP conference hosted over 85 Korean institutional investors at the Lotte Hotel in Seoul, Korea with speakers from Morgan Stanley Alternative Investment Partners (UK), J.P. Morgan Asset Management –Global Real Assets (USA), BlackRock Private Equity Partners (PEP) (USA) and Adams Street Partners (USA) among others.
About SLIA
SLIA is a private equity fund focused on acquiring Latin American natural resource companies in three sectors: agriculture, energy, and mining. Upon acquiring the Latin American companies, the Fund seeks to add value by creating tangible linkages to Asia.
“When the European Central Bank and U.S. Federal Reserve print excessive amounts of money, it creates inflation. The safest things for investors to hold in an inflationary environment are gold mines, soybean farms and other hard assets”This Forum brought together a range of Korean institutional investors to examine the opportunities and risks found in global alternative investment strategies. Mr. Bethel's address discussed the growing opportunities between Latin America and Asia by presenting a case for investing in Latin American resources.
“Broadly speaking, when large Asian pension funds and other institutional investors invest outside the region, they tend to be biased towards US and European funds,” explained Mr. Bethel. “Only 3% of Asian LP capital is committed to non-Asian Emerging Markets, which is too bad because Korean and Japanese investors are missing out on great growth opportunities.”
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Mr. Bethel made the case that Korean investors should take note that Latin American economies are growing because of Asia. When Korean, Chinese and Japanese automotive companies sell a car or when White Goods Companies sell an appliance, everything that goes into that product is made from a commodity, including iron, aluminum, plastics and copper. “The problem,” notes Bethel, “is that there aren't enough of these natural resources in Asia. Therefore, Asia needs to source commodities from somewhere and Latin American countries such as Brazil, Peru and Chile are resource-rich.”
Bethel also pointed out that perhaps in the short-term, commodity prices may fall because of the fears surrounding Greece, Spain and other troubled EU countries. Despite this, notes Bethel, “Continued urbanization in China and India have far reaching implications, and this means that commodity prices will be buoyed by these factors in the longer-term. China still has roughly 700 million people living in rural areas and the country is experiencing a massive wave of urbanization, which means more houses, more cars, and more refrigerators. All of this is positive for iron ore producers, soybean companies and copper miners.”
Other factors that could affect commodities include macroeconomic policies in Europe and the US. “When the European Central Bank and U.S. Federal Reserve print excessive amounts of money, it creates inflation. The safest things for investors to hold in an inflationary environment are gold mines, soybean farms and other hard assets,” said Bethel.
Despite the discussion surrounding commodity prices, Bethel sought to explain that SLIA was investing in natural resource firms with solid fundamentals that transcended vicissitudes in the commodity cycle. “To be clear,” stated Bethel, “commodity prices are important, but they don't drive our investment strategy. SLIA invests in businesses run by goods managers who have the potential to make money despite the up and down movements in commodities. These companies have a sustainable competitive advantage which could include logistics, resource grades or favorable extraction costs.”
The Korean LP conference hosted over 85 Korean institutional investors at the Lotte Hotel in Seoul, Korea with speakers from Morgan Stanley Alternative Investment Partners (UK), J.P. Morgan Asset Management –Global Real Assets (USA), BlackRock Private Equity Partners (PEP) (USA) and Adams Street Partners (USA) among others.
About SLIA
SLIA is a private equity fund focused on acquiring Latin American natural resource companies in three sectors: agriculture, energy, and mining. Upon acquiring the Latin American companies, the Fund seeks to add value by creating tangible linkages to Asia.
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