Peru Buyside Bets on Infrastructure, RE

Real estate and infrastructure stand out as attractive sectors for Peru’s local investors, according to panelists at last week’s LatinFinance Andean Investment Forum in Lima. They also want regulators to prioritize boosting secondary market liquidity. There is a large infrastructure gap in Peru, says Alejandro Perez-Reyes, CIO of Prima AFP. He adds that pension funds have cash to allocate, but the main hurdle is time spent building tailored investment vehicles. “It takes a long time for the process before [infrastructure funds] can raise money,” says Perez-Reyes. He sees health care as a growth area in Peru over the next few years, though the market lacks entities to invest in. Javier Freyre, CEO of InVita Seguros De Vida y pensiones, prefers infrastructure projects linked to inflation. He also highlights real estate, including direct investment in housing projects, as a strong growth area for the next few years. Both sectors are great for buy-and-hold investors, he says. However, more secondary market liquidity is needed to develop equities and local bonds. “We are willing to take a lot of risk in local currency, but there are some artificial barriers to entry by having a less liquid market,” says Danilo Simonelli, head of EM fixed-income at Ontario Teachers Pension Plan. He adds that Peru is a “success story” with strong growth in several sectors. Developing a repo market would be one useful tool, Simonelli notes. Jose Martinez, CIO at Rimac Seguros, agrees that allowing short sales and broadening availability of derivatives for institutional investors should help. Perez-Reyes says he would like to see AFPs be able to lend shares.