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February 22, 2007
New Fund for Affordable Housing In Latin America
    by Anne Moore Odell

With $100 million pledged from OPIC, the Alsis Latin America Fund supports home construction and local capital markets in Latin America.


In July 2006, the Overseas Private Investment Corporation (OPIC) called for proposals for a private equity investment fund to help bolster housing in Latin America. In January 2007, OPIC announced that Alsis Funds was the recipient of $100 million to help with community development projects in Latin America, starting in Mexico and Central America.

OPIC, an agency of the US government, helps US businesses invest overseas. At the same time, OPIC fosters economic development in new and emerging markets. This new fund fits with OPICís mission of endorsing healthy development in housing and mortgage finance with the support of US private sector capital and expertise. Community development projects such as this act as bridges between under-served people and capital sources.

Of late, OPIC has focused on affordable housing and mortgage finance. Not only is housing needed in Latin America, housing serves as a platform for secondary economic growth as homeowners use their houses as collateral to establish businesses. Tim Harwood, OPICís public affairs specialist said, "OPIC has been working for a number of years to leverage the experience of American companies to facilitate the growth of secondary mortgage markets in Central American countries."

"There is a large affordable housing deficit in Latin America with extreme market inefficiencies," agreed Alfonso Montiel, co-founder and Managing Director of Alsis Funds. Florida-based Alsis plans to increase and improve affordable lending in emerging markets by enhancing liquidity through the acquisition of loan portfolios and capital market securitizations. In a securitization, securities are issued representing interests in pooled assets.

With a targeted capitalization of $300 million, the Alsis Latin America Fund looks for
equity capital from institutional investors, investment banks, multilateral lending agencies, and high net worth individuals. With a third of this capitalization coming from OPIC, Alsis is well on its way to meeting its goal.

By focusing on residential loan portfolios, in particular the affordable housing segment, Alsis will work in the secondary market to avoid competition with local primary loan originators. Equally important, it will build on the technology and processes developed through the securitization of residential loans to stimulate future activity in the affordable segment of other asset classes throughout the region.

"The objective of the Alsis Latin America Fund LP is to generate strong risk adjusted returns by acquiring asset-backed loan portfolios in Latin America and securitizing them in local and international bond markets" Montiel told Socialfunds.com. "However, Alsis Fund investments include other eligible asset classes such as loans backed by non-residential assets, micro-finance, commercial real estate, and land," he added.

The Alsis Fundís managers have extensive experience in capital markets transactions and have closed over US$1 billion of mortgage-backed securities in countries such as Mexico, Argentina, and Colombia. Xavier Gonzalez-Sanfeliu, co-founder of Alsis, gained experience as Head of Emerging Markets Securitizations for Bear Stearns. OPIC selected Alsis because of its successful track record providing mortgage finance to markets in Central America and Mexico. However, because it is a mortgage finance vehicle, Alsis is somewhat different than the typical OPIC investment fund manager.

Maintaining itself by charging market-comparable interest, fees and insurance premiums to the US companies it supports, OPIC costs the U.S. taxpayer nothing, but instead operates at a surplus, reports Harwood.

OPIC has helped develop more than a dozen housing projects around the world, facilitating both housing construction and the provision of mortgage finance. It also held a well-received housing conference in Cape Town, South Africa, last May, which drew more than 270 US and African participants and representatives from 21 African countries to learn about housing investment opportunities in Africa.

 

 
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