What I Learned About Puerto Rico’s Fast-Growing Alternative Investment Market

After spending the start of the month at the Uncorrelated conference in Puerto Rico, I’m back in the office feeling energized — and with a fresh perspective on a market that’s often overlooked.

Puerto Rico’s alternative investment scene seems to be truly unique. Unlike many markets where institutions dominate, the investment dollars flowing into funds both on the island and on the U.S. mainland come mainly from the island’s wealthy individuals. It’s a nuance that shapes the character of the entire ecosystem — and, as I saw first-hand, it comes with some real advantages.

A Market Powered by Individuals

One of the most striking takeaways from the conference conversations was just how influential Puerto Rico’s high-net-worth individuals are in driving alternative investments. Business owners, entrepreneurs, and family offices form the backbone of the market.

While some might see the absence of large institutional capital as a limitation, the reality is far more positive. Individual investors often move more quickly, make decisions more flexibly, and build closer relationships with fund managers. For managers operating there, that means the ability to develop tailored strategies and engage in genuine, collaborative dialogue with investors.

Growth Is on the Horizon

It was also clear from the discussions that Puerto Rico’s alternative investment market is in growth mode. Assets under management by local funds are steadily rising, helped by pro-investment legislation like Act 60 (formerly Acts 20 and 22), and by the island’s appeal to wealthy newcomers.

While Puerto Rico’s market isn’t nearly the size of New York or Miami, of course, the energy is palpable — and the trajectory is promising.

The Big Plays: Asset Classes on the Rise

Across conference panels and informal chats alike, four asset classes kept coming up:

• Private Equity: There’s strong interest in private companies, especially those with innovative growth stories.
• Real Estate: Real estate remains a major focus, buoyed by recovery efforts and an increasing appetite for prime properties on the island.
• Hedge Funds: A number of locally based hedge funds are making waves, particularly those specializing in opportunistic and event-driven strategies.
• Venture Capital: Still emerging, but gaining momentum — Puerto Rico’s venture ecosystem is starting to attract serious attention, both locally and from the mainland U.S.

Challenges to Overcome

Of course, like any emerging market, Puerto Rico faces its own set of challenges. While the island’s tax incentives and high-net-worth individual base are driving initial growth, the infrastructure supporting alternative investments still has room for improvement.

The island’s financial services industry, though growing, lacks the depth and scale of larger financial centers. The absence of major institutional investors, sophisticated legal frameworks, and a more developed capital markets ecosystem means Puerto Rico will need to continue attracting talent and capital to compete on a global scale. Moreover, ongoing challenges related to political and economic stability can create some uncertainties for long-term investors. But even with these hurdles, Puerto Rico is showing promise — and the market has shown that it’s up to the task.

Why Puerto Rico’s Market Structure is a Hidden Strength

One thing became very clear to me during my time there: the structure of Puerto Rico’s alternative investment market isn’t a weakness — it’s a competitive edge.

The personal nature of investor-manager relationships creates an environment where innovation thrives. Decision-making is faster. New strategies are tested and adopted more readily. And with a steady influx of new residents and new capital, the investor base is broadening year by year.

Puerto Rico may not have the deep institutional pockets of larger markets (yet), but it offers something equally valuable: a dynamic, entrepreneurial spirit that’s driving real growth — and creating exciting opportunities for those ready to engage.

I’m already looking forward to next year!

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Anthony D. Mascia is Managing Partner at EFSI. Connect with him on LinkedIn here.

EFSI is an independently owned, SOC-1 compliant, full-service fund administration firm. We provide accounting, reporting, administrative, and capital introduction services to a wide range of alternative investment funds including hedge funds, funds of funds, private equity funds, real estate funds, venture capital funds, and family offices. The center of EFSI’s service incorporates resilient technology and accomplished staff, providing clients a tailor-made service with exhaustive transparency. Give us a call today or reach out to our support team online. We look forward to hearing from you soon.