The accelerating growth of the U.S. Hispanic economy has set the stage for a wave of entrepreneurial expansion, but a "capital gap" for strategic middle-market companies key to fueling much of the gains will require broad infrastructure and policy changes for the market to fully advance.
In a seminal CEO Roundtable on the issue convened by Hispanic Business in New York City in June, more than three dozen financial leaders from the Hispanic economy observed that Hispanic-owned middle-market companies face unique challenges. Notably, despite surging U.S. Hispanic demographics – population, educational attainment, purchasing power, home ownership, labor-force participation, and entrepreneurship – obstacles to equity still exist for the vast majority of companies in the middle of the economic pyramid.
"Public policy helps foster start-ups, but unless you have public policy that lets [businesses] move up the scale, we're just going to be stymied. We have to have think-tank meetings with leadership in order to change that public policy," said John Lopez, chairman of Lopez Foods.
"The question is why the money is not coming," Juan Solana, chief economist for Hispanic Business, said in his presentation. Despite political, exchange-rate, and other risks, U.S. capital continues to flow to overseas markets such as China and India. "Minority-run venture capital firms have generated 24 percent annual average return versus 20 percent for the comparable benchmark of the overall market, yet capital remains unavailable for existing and emerging domestic opportunities," he noted in the presentation.
The leadership roundtable summarized key barriers to carving capital channels to Hispanic middle-market companies. They include: a lack of, or imperfect, investor information about opportunities and business models in the Hispanic market; weak professional and social networks linking companies and entrepreneurs to the financial markets; low representation of Hispanics in the financial industry; and regulatory policies that inhibit investment.
More than three dozen financial leaders from the Hispanic economy convened for the Hispanic Business CEO Roundtable® at the Westin Times Square in New York City to strategize on ways to increase access to capital markets for mid-size Hispanic-owned companies.
Luis Nogales noted that his company, Nogales Investments, is one of only three Hispanic-owned equity firms in the nation that is in the hunt for middle-market opportunities. And Mr. Solana cited a finding by the New America Alliance that Hispanics control only 0.2 percent of funds in the private equity market. The alliance also found that there is only one investment management consulting firm, fewer than 30 asset-management firms, five private-equity funds, and 15 brokerage firms that are Hispanic-owned.
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