Perspectives on the Alternative Investment Industry in LATAM

Q&A session with Philippe A. Stiernon, Founder, CEO and Managing Partner at ROAM Capital

Founded in 2011, ROAM Capital is Latin America’s first alternative asset placement agent focused exclusively on private equity, real estate, and other alternative investments with no ancillary lines of business or conflicts. Following ROAM Capital’s success in the Pan Finance Awards Programme (the 2021 winner in the category of “Best Fund Placement Agent – LatAm”), we spoke with CEO and Managing Partner Philippe Stiernon.  In this in-depth interview, Philippe gives us his unique insights into the alternatives industry in LatAm and the factors that set apart this award-winning Placement Agent.

We see ROAM was recently featured in Preqin’s Latin American report as a Prominent Latin American Placement Agent representing the likes of Starwood Capital and General Atlantic, tell us more about your philosophy and approach when selecting managers? 

To date, ROAM has raised over $4.5bn from accredited Latin American investors for more than 33 investment funds. As you mention, we have had the opportunity to work side-by-side with some of the world’s leading managers, including Starwood, Oak Hill Capital, Harrison Street, GA and Greenspring among others. Unlike many of our competitors, we tend to work with a small group of specialist managers that are leaders executing a strategy, sector, or dominating a market segment, the real alpha creators. We tend to shy away from large platform GPs or the so-called “asset gatherers” that are marketing across asset classes. We also have a high-conviction and long-term approach, where we invest our own capital in everything we distribute and devote ourselves with loyalty to help these clients raise strategic capital in Latin America over multiple fund cycles (at least 2 vintages). 

What does R-O-A-M stand for?

The ROAM capital acronym is emblematic of our firm’s culture and DNA, having been conceived with the primary purpose of highlighting two of our most important and distinguishing value-adds: Risk control Over Asset Management (“Risk Control”), and Research of Alternative Managers (“Research”). From this Risk Control and Research driven DNA, we seek to identify the best risk-adjusted strategies within the PE, RE, PC, and VC asset classes, while similarly seeking to identify the best managers within these inherent strategies, with a constant focus on risk mitigation and return maximisation. We constantly strive to achieve to work with managers that provide the best risk-adjusted returns as opposed to just focusing on absolute returns irrespective of risk. 

Why is ROAM different from other placement agents in the region?

Our success as the leading conduit between sophisticated Latin American capital and the world’s leading alternative fund managers comes from our track record and reputation, deep sector knowledge, trusted investor relationships, local regional footprint, and singular focus on alternative fund distribution. ROAM adheres to two guiding philosophies: quality over quantity and rigorous due diligence, so we pride ourselves in working with a very select and distinguished group of highly vetted managers with whom we can establish strategic and long-term relationships. For sourcing, ROAM utilises a proprietary research-driven manager selection process, which assists us in identifying the top-performing fund managers and asset classes in the alternative investment landscape with a primary focus on superior risk-adjusted returns. 

Tell us about the evolution of the Alternatives Industry in LatAm

Alternative investment penetration in Latin America has been advancing at a galloping pace during the last decade. Aggregate commitments to alternatives have rapidly increased, and total assets under management (AUM) are approaching $2tn, driven by a growing middle class, favorable demographics, and benign regulatory frameworks across most countries in the region. This trend started in the 2008-2010 period when pension funds in Colombia and Chile made the first commitments to alternative investments. It has since evolved into a broader opportunity set and paved the way for other countries like Peru – already a mature market in its own right – and most recently Mexico – the blank canvas of the region – to become significant players in the alternative investment allocation business. 

Why is LatAm increasing in importance for alternative’s managers around the world? 

The ‘flight to quality’ dynamic in Latin America, where investors favor assets in US and European markets over local assets, began decades ago. However, as local investors have searched for alpha and geographic diversification, the trend has been exacerbated in recent years by the political and economic woes of the region, the limited options afforded by the local investment environment, and the frequent underperformance of local assets. For example, falling interest rates in Brazil have boosted appetite for alternatives, and political uncertainty in Mexico has prompted an investor exodus. 

For savvy developed-market managers, these dynamics have created a unique opportunity to expand their pool of available capital, while securing a foothold in a region that is bound to grow in size and sophistication. The fundraising potential is quite significant, with some managers capturing $300 to $400mm in aggregate commitments during their first foray into Latin America, and re-ups of $1bn+ for those that are successful with their immediate successor funds. 

What are the key factors for a manager to successfully raise capital in the region? 

With increased opportunity comes heightened competition and greater sophistication among prospective LPs. Pension alternatives teams and family office CIOs have become extremely discerning in their quantitative and qualitative due diligence, including ESG and other matters such as succession planning, alignment of interest, and company culture. Following the global trend, Latin American LPs have also started to rationalize the number of GP relationships in their portfolios by focusing on a select group of managers with whom they believe they can be successful over time. 

It is very important for managers to comprehend that the ‘one size fits all’ approach simply does not work in Latin America. For this reason, seeking a local partner with a keen understanding of all the key markets and privileged access, such as ROAM, is highly recommended.  In ROAM we assist GPs in deciphering the varying needs and levels of sophistication of Latin American LPs, these vary by country, investor type, and inherent regulatory frameworks. For example, what may be of interest to a Colombian or Peruvian LP may be vastly different from what is suitable for their Mexican or Brazilian counterparts.

What about the impacts of the Pandemic? How is ROAM seeing the market?

The COVID pandemic generated a slowdown in the industry, especially in the first 3 quarters of 2020, as many institutional investors (mainly pension funds) paused their alternative investments programs to assess liquidity needs and withdrawals from their affiliates. On the other hand, managers also entered a standby period in terms of capital deployment, as they evaluated the impacts on their current portfolio assets and their pipeline of new opportunities. 

Since Q3 2020, ROAM has evidenced a rebound in fundraising, both in terms of supply (No. of funds raising capital) and demand (investors rebooting their investment programs). Thus far, since the beginning of the pandemic, ROAM has closed commitments of ~$800 million, mainly derived from the flagship vehicles of two of its partners in the Opportunistic Real Estate and Growth Equity space. We are looking forward to closing 2021 with over $1Bn raised, which would represent a very important milestone for the firm and its team. 

During this period, it is noteworthy to mention we have also focused on further strengthening our Research and Business Development capabilities, having added two new members to the team, as well as opened a new office in Miami as we seek to provide our clients and investors with an ever closer and hands-on quality service.  

What do you see for the alternatives market in the region going forward? 

We believe investor’s allocation to alternatives will continue to grow significantly in the coming years (in some countries at a greater pace than others). We are viewing great opportunities in Colombia (the headquarters of the two largest allocators in the region) and in Mexico, especially as institutional investors continue to expand their alternatives investment programs, and in Brazil from a private investor and family office perspective.

We are also seeing that LPs in the region keep strengthening their alternatives teams and due diligence processes while focusing on those managers and strategies that provide optimal risk-adjusted levels of return and alignment with international best practices. 

Regarding capital raising, the key for managers lies in thinking ahead and having a long-term approach to the region. Given the high levels of competition and complexity across the different markets, we recommend working with a proven local partner that will help to create and execute a targeted and highly efficient fundraising strategy.

Finally, how do you feel about ROAM been granted this award by Pan Finance?

We are honoured to receive this award as it comes as a recognition of the hard work and dedication of the team. At ROAM we are always striving to raise the bar in the services we provide to the managers we represent and the investors that entrust us. This is our second recognition from the industry, the first one was granted by ColCapital (the Private Equity Association in Colombia) in 2018 as the leading Placement Agent in Colombia and this time, being recognised by an international organisation as Best Placement Agent in Latin America provides us with additional confidence to keep building momentum and cementing our leadership position in the region. 

About Philippe

Philippe is the Founder, CEO, and Managing Partner of ROAM Capital. He manages all core fund marketing mandates and spearheads relationships with prospective LPs on behalf of the firm’s clients, particularly with respect to senior decision-makers at pension funds.

Philippe’s background is in wealth management, alternative investments, and private equity. He graduated from Georgetown University with degrees in Finance and International Business and also holds an MBA from Georgetown’s McDonough School of Business where he graduated with high distinction. Philippe is also a member of Georgetown’s Latin American Board. He is fluent in English, Spanish, and French and is based out of Miami.