Mexico Fund of Funds (Fondo de Fondos)

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A public-private investment platform that supports entrepreneurship and business growth by channeling capital into Mexican private equity, venture capital, and impact funds.
What are the main aims and objectives?

The Mexico Fund of Funds was created to address the underdevelopment of Mexico’s private equity and venture capital ecosystem. The program’s main objective is to catalyze productive investment that supports innovative companies, especially small and medium enterprises (SMEs), technology startups, and impact-driven ventures. By pooling capital from Mexican development banks, pension funds, insurers, and international agencies, Fondo de Fondos seeks to increase the availability and diversity of risk capital in Mexico. The specific goals cited by policymakers include: fostering a culture of risk capital, strengthening fund management expertise, encouraging domestic and foreign investment, mitigating the historical barriers to finance for local entrepreneurs, and promoting the adoption of international standards for governance and sustainability.

How does the program work?

Fondo de Fondos operates as an investment manager that allocates pooled capital into a diverse range of funds—including private equity, venture capital, energy, infrastructure, real estate, private debt, and impact investments. The intervention is designed to shift the Mexican financial landscape from one dominated by conservative debt instruments to a more balanced mix, supporting innovation and entrepreneurship.

Capital is raised primarily from institutional sources, including the main Mexican development banks (Nacional Financiera, Bancomext, Banobras), domestic pension funds, insurers, and multilateral agencies. The pooled resources are then invested in professionally managed funds focused on Mexican growth opportunities. Due diligence procedures prioritize fund managers with strong track records, sector expertise, transparent governance, and commitment to environmental, social, and governance (ESG) practices.

Support for startups and SMEs occurs indirectly through these funds, which provide equity and sometimes debt to eligible businesses. Target companies span sectors such as technology, energy, logistics, and real estate, with increased attention given to early-stage, high-growth, and innovative ventures. The structure also enables direct co-investments in select companies alongside partner funds. Thus, the program acts both as a catalyst for new fund formation and as an anchor investor, attracting additional market players to the space.

In addition to capital provision, Fondo de Fondos supports investees by sharing international best practices, offering operational guidance, and implementing robust monitoring mechanisms. The fund also facilitates the issuance of investment products (CKDs and CERPIs), enabling Mexican pension funds to participate within regulatory frameworks. Eligibility requirements for underlying funds and investees revolve around professionalism, alignment with Mexican development priorities, and demonstrated capacity for growth.

What is the overall cost?

The Mexico Fund of Funds launched in 2006 with an initial capitalization of approximately $450million USD (c.8 billion MXN at 2006 rates), contributed by founding institutional investors. By 2025, total assets under management had grown to around $1billion USD (c.17.2 billion MXN at the 2025 exchange rate). All funding comes from institutional partners—Mexican development banks, pension funds, insurers, and multilateral agencies. No fees are charged to startups receiving investments; costs are borne by the fund through agreements with its investors.

How was it implemented?

Mexico Fund of Funds was implemented through collaboration among top Mexican development banks—Nacional Financiera, Banobras, Bancomext—and with sector experts, international advisors (including Cimarron Capital Partners), and government stakeholders. The idea originated in 2006 in response to the need for modern investment vehicles that could support entrepreneurship and attract foreign capital.

Implementation began with the pooling of long-term capital from institutional investors and the design of operational policies reflecting global best practices. A professional management team was recruited, including specialists in fund assessment, portfolio management, and sector analysis. Agencies responsible for oversight included the founding banks, with participation from policymakers, pension fund administrators, and contributors from international development organizations.

The fund adopted clear governance and reporting protocols, requiring regular performance evaluation and benchmarking against international standards. Critical elements involved developing due diligence frameworks, establishing investment eligibility criteria, and creating standardized investment products that enabled pension fund participation (CKDs, CERPIs).

Program milestones include:

  • 2006: Founding partners agree on structure and initial funding.
  • 2007-2012: First investments made; key partnerships with local fund managers.
  • 2012 onwards: Expansion into co-investments and impact sectors; increasing international investor participation.
  • 2020: CAF commits $40million USD to Mexico Fund of Funds II.
  • Present: Assets under management reach c.$1billion USD; continued diversification and institutional support.
What impact has been measured?

Mexico Fund of Funds has made measurable progress in building the country’s venture capital and private equity ecosystem. Since launch, it has supported over 60 Mexican and regional funds, enabling them to invest in more than 150 local companies. There is no further information available about the impact of the fund.

What lessons can be learned?
  • Regulatory limits on pension fund and institutional investor exposure slow larger-scale mobilization of private equity and venture capital.
  • Mexico’s alternative investment market is constrained by a shortage of fund managers with deep track records—capacity-building must remain a priority.
  • Rigid structures for investment products complicate collaboration with global general partners, especially leading international funds.
  • Insufficient domestic demand for risk capital keeps some sectors underfunded, highlighting the need for deeper local investor engagement.
  • Conservative investment mandates among institutional partners can stifle innovation in portfolio selection and risk-taking.
  • Future progress depends on streamlining regulatory frameworks, fostering flexible investment structures, and expanding the pool of professionally certified fund management talent.
  • Ongoing economic volatility and global financial uncertainty require adaptive strategies and collaboration with international best-practice networks.

CURATED BY

Tom Hancock

Research Associate
Global Entrepreneurship Network
United Kingdom