Family offices, a principal actor in the Peruvian asset management industry, have largely been absent from the Lima startup ecosystem. The local startup movement has seen significant investment from the government, angel investors, and regional venture capital funds – local family offices represent the next rung on the ladder.
Family offices are dedicated investment teams that actively manage the wealth of high net worth individuals. According to Gestion and a report by BCG, there is close to $100 billion in private financial wealth in Peru. A portion of that is managed in single or multiple family offices, of which there are at least 20 in Peru.
Some of that capital will evenually makes its way into the startup ecosystem through investments in the venture capital asset class. The asset class offers long term investment strategy un-correlated to other investment options. On the extreme end of actively managed funds in the world, in the Yale University endowment which allocates over 20% of its portfolio to venture capital, mostly in the US. Latin American family offices would have a competitive advantage compared for foreign investors for sourcing opportunities or investing in key sectors they are knowledgeable about.
Despite investment rationale to include venture capital in an investment portfolio, there a few reasons that local family offices don’t invest local directly or indirectly in Peru startups:
- Wealth preservation. The goal of many locally managed investment portfolios is often to reduce risk and optimize taxes. Not generate risk adjusted returns.
- Dividend strategy. Many local portfolios seek portfolio allocations that provide dividends, leading to investments in debt instruments (renta fija) and real estate. The reality is that there are alternative asset classes locally that provide very attractive risk adjusted returns compared to venture capital.
- Geographic diversification. Much of the wealth was generated locally so it makes sense for investment managers to diversify by Investing abroad.
There are some early adapters among family offices in Peru. Winnipeg Capital stands out as member of PECAP, the Peruvian Seed and Venture Capital Association, and an active early stage investor. The investment team of Grupo Wiese has led direct investments in Juntoz, Comunal, both led by Endeavor entrepreneurs, and Selina. A few additional family offices have invested opportunistically in one or two startups, without building a portfolio approach.
Recently, Nate Lustig of Magma Partners offered some pointers for family offices in emerging markets who are evaluating startup investments.
In a startup ecosystem where even the founders are backing other founders, the successful empresarios of the past decades will soon take a closer look at the venture capital asset class, and through their family offices, join the startup ecosystem as a relevant actor.