Vowing to honor his parents' hard work, Rodriguez earned an MBA from the University of Pennsylvania's Wharton School, worked for GE in Mexico, then became a successful financier.

"One great lesson I learned from my parents," Rodriguez says, "is that no one can take away what's in your heart and in your head."

Reflecting his father's entrepreneurial spirit, Rodriguez left buyout firm Joseph Littlejohn & Levy 11 years ago to launch Palladium Equity Partners, a fast-growing investment firm in New York with $1 billion invested in Latino-related small and midsize companies.

"We're bringing Wall Street to the barrio," Rodriguez says.

Palladium and a growing number of private-equity firms invest in what bankers call the "U.S. emerging domestic market," or ethnic and urban businesses. More than 55 such firms manage $10 billion in capital, according to the National Association of Investment Companies.

Competition increasing

Now, large investors and Fortune 500 companies are vying for Hispanic, African-American and Asian-American consumers. Palladium especially is eyeing the 40 million Latinos who are 15% of the U.S. population. Market-research firm HispanTelligence projects U.S. Latino purchasing power will hit $1 trillion by 2010.

Boasting investment professionals with global experience, Palladium invests in Hispanic-owned businesses that cater to Hispanic consumers in banking, retail, media, health care and business services.

"Palladium is unique because we have a horizontal focus, the ability to cross the spectrum of many industries," says Gary Nusbaum, a Palladium partner who has worked in Latin America, Asia and Europe. "The U.S. Hispanic market really does affect every industry."

Palladium's portfolio of companies includes:

• Todobebé, a multimedia firm in Miami for Spanish-speaking families with kids under 5. Todobebé offers TV and radio shows, a website, a magazine and a parenting guidebook called The Todobebé Book published by Harper Collins-Rayo.

Todobebé's Viva la Familia!, a new TV show on parenting co-hosted by actress and expectant mother Aracely Arambula and Todobebé co-founder Jeannette Kaplun, could be a crossover hit. In its debut on Univision on July 25, Viva la Familia! was the No. 1 U.S. network show — in English or Spanish — in the 10 p.m. prime-time slot among adults 18 to 34.

"We're seeing great demand and interest in reaching this market in a context that's family-oriented," says Gillian Sandler, CEO and co-founder of Todobebé.

• Castro Cheese, a Houston-based company founded by Mexican immigrant Maria Castro in the 1970s in her kitchen. Today, Castro Cheese is one of the biggest U.S. Hispanic cheese companies; its La Vaquita brand is sold to supermarkets, restaurants and hotels worldwide. Castro agreed to sell her company to Palladium after Alex Ventosa, a Palladium managing director born in Spain, spent a year gaining her trust and convincing her that Palladium would take good care of her family business. "Alex's accent … reminded her of her grandfather," Rodriguez says. "We were able to acquire that business, whereas other larger strategic buyers could not."

• Promérica Bank, a small community bank founded two years ago by Maria Contreras-Sweet, former head of several California state agencies and a Mexican immigrant who saw an urgent need for a Latino-owned bank in Los Angeles.

Promérica has only $70 million in assets, but it is growing quickly. The bank's cultural closeness to Latinos gives it an edge. For one, Promérica offers financial classes in a large room with a kitchen, because Hispanics "feel more comfortable sitting around a table talking, having a little food and feeling like family," says Contreras-Sweet.

Like Bank of America, which began as the Bank of Italy in San Francisco a century ago, Promérica hopes to broaden its appeal to small businesses owned by all minorities, as well as those owned by women.

"Whether Latino or Italian or Indian," says Contreras-Sweet, "we want to make sure they fulfill their potential for economic success."

A national market

In years past, the Hispanic market existed mainly in big cities. Now, Nusbaum says, the Latino population explosion has led businesses to develop national strategies.

Palladium invests $5 million to $100 million in promising businesses, typically acquiring large stakes, joining boards and carrying out restructurings and buyouts. The privately held firm doesn't disclose the investment performance of its two funds, which have assets of $1 billion. Rodriguez says the funds are growing and doing well, even during the economic slowdown.

Palladium has attracted large investors and pension funds, including Spanish bank BBVA, California State Teachers' Retirement System (Calstrs) and California Public Employees' Retirement System (Calpers).

Hispanic consumers will have as great an impact on the U.S. economy as Baby Boomers now and European immigrants in the last century, says Calstrs Chief Investment Officer Chris Ailman. Calstrs, which has $160 billion in assets, has committed $40 million to Palladium. "This will continue to be a very strong, long-term trend and investment theme," Ailman says.

For Rodriguez, it was only a matter of time before the Latino market took off. He noticed it on Wall Street as he researched Hispanic companies. He glimpsed it in Mexico's Rio Grande Valley, where the economy was starting to boom. And he recalls it as a kid in New York, where Latino businesses have thrived for years.