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Performance of Brazilian Private Equity and Venture Capital Funds (1994-2018) (Spectra Investments)

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StudySpectra InvestmentsJanuary 201811 pages17 min readOriginal source
Key number
37 billion
Total capital called p.2
Largest segment
75%
Share of funds under 10 years old p.4
What changed
5.0%
Average Net IRR reduction due to FX devaluation p.5

Summary

  • The final sample analyzed in the study consists of 268 Private Equity and Venture Capital funds raised in Brazil between 1994 and 2018.p.3
  • The funds in the sample called a total of USD 37 billion (BRL 84 billion) and distributed USD 20 billion (BRL 46 billion) between 1994 and 2018.p.4
  • Brazilian PE and VC funds achieved an average net TVPI in BRL of 1.62 and an average net IRR in BRL of 9.8% p.a.p.2
  • Foreign currency devaluation reduced the average net IRR from 9.8% p.a. in BRL down to 4.8% p.a. in USD.p.5
  • On average, funds outperformed local benchmarks, returning 2 times similar investments in IBOVESPA, 1.9 times MSCI EM, and over 2.6 times CDI.p.6
  • Brazilian PE and VC funds underperformed global, North American, and European PE and VC industries, which averaged net IRRs of 12%, 13%, and 16% p.a. in USD, respectively.p.6
  • First quartile Brazilian funds generated an average IRR of 40.6% in BRL and 36.7% in USD, with an average TVPI of 3.17 in BRL and 2.61 in USD.p.9

Key insights

  1. 75% of the examined Brazilian funds were raised after 2008 and had not completed a full 10-year private equity cycle.p.4
  2. Currency devaluation led to almost two-thirds of local gains fading away in USD terms, lowering mean TVPI from 1.62 in BRL to 1.34 in USD.p.5
  3. The performance dispersion between the bottom of the first quartile and the bottom of the third quartile was 30.0% in USD and 27.7% in BRL.p.6
  4. Brazil's performance dispersion of 30% is substantially higher than the dispersion seen in Global (25%), North American (15.8%), and European (13.8%) markets.p.6
  5. 42% of the funds achieved a net TVPI in BRL higher than 1.5, which drops to 32% of funds when measured in USD.p.7
  6. 40% of the funds achieved a net IRR in BRL higher than 15%, dropping to 32% of funds when measured in USD.p.7
  7. If currency risk is ignored, 83% of Q1 Brazilian funds would be classified as first quartile globally and 7% as second quartile globally according to IRR performance.p.8

Published by Spectra Investments (funder profile)

Topics and entities

GlobalPrivate equityPrivate marketsStartup fundingVenture capitalABVCAPComissão de Valores MobiliáriosInsperSpectra Investments

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