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Eduardo Rincon Gallardo, Director of Alternative Investments in Latam

Valuation of Alternative Investments Focused on Real Estate Assets

Eduardo Rincón Gallardo

Valuation Transparency Champion

The Professionalization of Alternative Investments

The shift that stands out most is professionalization. Alternative assets have moved from a marginal allocation to a strategic component of institutional portfolios across Latin America and pension funds now target them in pursuit of more efficient and better-diversified portfolios aligned with long-term investment horizons. The magnitude of that shift is reflected in data[1]: between 2020 and 2025, assets managed by pension funds in countries members of the International Association of Pension Fund Supervisors (AIOS) grew approximately from US$631 billion to US$840 billion, representing a compounded annual growth rate of 6.6%. Allocations to alternatives, however, expanded faster, at compounded annual growth rates of 16% in Colombia, 17% in Mexico and 61% in Chile (AIOS, Investment Portfolio Composition in AIOS Country Pension Systems, June 2026).

Professionalization is also reshaping how capital is deployed, alongside growing specialization within the alternatives sector. Investors have become more selective in their choice of general partners (GPs): when a track record and a credible pipeline is sufficed, limited partners can examine operational due diligence, governance and whether portfolio valuations are determined by an independent third party under recognized international valuation standards (IVS). That rigor is what more disciplined asset allocation looks like in practice across the region's markets.

Why the Submarket Matters in Alternative Investment Valuation

Investors and managers alike dedicate real effort to country analysis and then treat submarkets as a footnote—when it is precisely that layer that determines whether a valuation will hold. A real estate asset illustrates the point.

The decisive layer is the asset's submarket—supply and demand, cap rates, transaction liquidity and market rental and sale prices per square meter. Only against that backdrop can the asset itself be analyzed in depth, beginning with fundamentals: building quality, asset type, location, whether occupancy is stabilized or not; whether leases are held by premium tenants; and whether contracted rents sit above, below or in line with market levels. This work also requires a detailed review of the operating expense structure to establish a well-supported Net Operating Income based on market input, from which a fair value can be inferred. That value serves as a neutral reference for negotiation between buyer and seller, favoring neither party, establishing clear terms and remaining consistent with market pricing.

Attention must also extend beyond the valuation itself to the execution of the investment and divestment plan: the investment horizon should be carried out efficiently in terms of timing, development costs optimized to remain within budget and the disposal completed under appropriate submarket conditions and within the estimated divestment timeframe. Attractive acquisition and disposal opportunities surface throughout that cycle and they must be recognized early enough to act upon

Where the Biggest Opportunities and Blind Spots Lie

A clear opportunity over the next five years is industrial real estate driven by nearshoring: the relocation of supply chains toward the region generates demand for space faster than it can be offered and that gap is what generates returns. Equally significant is digital infrastructure, particularly data centers; power generation and the upgrade of electricity infrastructure, without which neither can scale; private debt; and multi-asset regional platforms that invest across different alternative asset classes—private equity, infrastructure, debt and real estate—throughout the region.

“In alternative investments, value is rarely found; it is built, market by market and asset by asset.”

The principal blind spot is valuation independence. In certain emerging markets, no independent third party determines the fair value of alternative assets, so private equity funds end up valuing their own investments. The manager thus becomes both judge and party. The implied costs are a loss of transparency, inconsistent adoption of the IVS and valuation methodologies applied loosely to the type of alternative asset involved.

The independent valuation firm exists to close that gap. Its role is to determine the fair value of alternative assets through the correct application of the IVS, preserving independence between the parties and ensuring transparency in the fair values reported. That work rests on two pillars: broad knowledge of the market where the alternative asset sits and a thorough analysis of the asset itself.

A second blind spot is overregulation. In several Latin American countries, public and regulatory institutions impose excessive requirements on private equity funds, financial firms and pricing vendors, creating administrative strain and reducing market dynamism: these firms must continually respond to requests from public bodies rather than remain fully focused on innovation and market growth. The solution lies in effective regulation by public institutions—neither absent nor excessive.

A final blind spot is the limited transparency of the market inputs among participants. Availability of information is essential: purchase and sale transactions, together with material events should be disclosed to the market, so that it can achieve greater depth and transparency 

Why Trust Must Be Earned Locally

Trust is earned locally; it does not transfer. Across the Latin American markets where I have worked—Mexico, Colombia, Peru, Costa Rica and Panama—what closes business is the ability to connect with each person individually: understanding their culture, demonstrating local experience and a credible track record, conveying trustworthiness and listening actively to understand each client's needs. Only on that foundation can a negotiation be closed and the relationship move forward into service delivery grounded in constant innovation.

Building Value Market by Market and Asset by Asset

My advice to those entering the alternatives space is to develop a deep understanding of the asset class in which they intend to invest. That means understanding the country where the asset is located—macroeconomic conditions, the tax and regulatory regime and the cultural dimension of how business is done in that market—and partnering with experienced professionals who bring genuine local expertise. It also means underwriting the submarket on its own indicators rather than on national averages.

Equally important is anticipating and providing for the risks inherent in the asset class and defining an effective strategy for meeting the asset's investment horizon—reassessing submarket conditions continually, so that exit opportunities are seized rather than missed. In alternative investments, value is rarely found; it is built, market by market and asset by asset.