Investor Profile and Return in Private Equity and Venture Capital (Spectra Investments)

Summary

• Foreign investors were once the dominant force in Brazilian private equity and venture capital, holding 84% of committed capital between 1994-1999, but dropped to 20% in the last three years.p.1
• Families and family offices have become the primary source of funding, securing 70% of committed capital in Brazil and 73% in venture capital over the last three years.p.1
• Underperformance impacted foreign investors, with an average USD IRR of 2.9% between 2008-2014 vintages compared to 16.9% for the Global Benchmark.p.1
• Pension funds reduced their committed capital share to just 1% following poor historical performance and fraud investigations halting investments after 2016.p.1
• Development Financial Institutions (DFIs) registered the lowest returns among all investor classes, with a USD (BRL) IRR of -3.6% (1.7%) since 2000.p.1
• In the 2017 vintage, family office investments benefited from a strong venture capital cycle, generating a BRL IRR of 70% and a USD IRR of 43%.p.2

Key insights

1. Foreign investors reduced their share of committed capital in Brazil from 84% during 1994-1999 to 20% in recent years.p.1
2. Families and family offices now represent the largest investor group in Brazil with 70% of committed capital.p.1
3. Venture capital outperformed private equity in Brazil over the last five years, generating a USD IRR of 35%.p.1
4. Pension funds halted new investments after 2016 due to low returns and fraud investigations, shrinking their share of committed capital to 1%.p.1
5. DFIs remain present in 10% of venture capital funds and 4% of private equity funds despite generating the worst returns overall.p.1
6. Currency fluctuations significantly impacted USD returns for foreign investors during exchange rate depreciation periods like 2012-2016.p.2
7. Foreign investors saw a rebound in performance after 2015 with an average USD IRR of 28%, beating global benchmarks.p.1