How private equity funds work in Colombia
Private equity funds are an investment vehicle managed by a professional team, whose main objective is to provide a return in the medium or long term to its investors, through capital investments in companies that are not listed on the stock exchange.
Private equity funds are also known as "smart money". In addition to offering capital to companies and/or projects, they provide added value through contact networks, sophisticated management structures, and better corporate governance arrangements to create value.
In Colombia, private equity funds are regulated through Decree 2555 of 2010 (and its amendment, Decree 1242 of 2013), in which they are categorized as a closed Collective Investment Fund. Collective Investment Funds can be any mechanism or vehicle for collecting or managing cash or other assets made up of the contribution of several people, managed collectively to obtain joint returns.
These funds are deemed to be closed because investors can only redeem their shares once the term expires, which is usually after ten (10) years.
Unlike open collective investment funds, in which shares can be redeemed at any time, private equity funds must allocate at least two thirds (2/3) of its investors’ contributions to the acquisition of assets or economic rights other than securities registered in the National Securities and Issuers Registry (RNVE).
This chapter includes key information about the characteristics of this investment vehicle in Colombia, the key actors that make up the ecosystem, the evolution of private equity funds in the country and a market trend analysis of funds in Colombia.
Updated (mm/dd/yyyy): 02.22.2018