Performance of Brazilian Private Equity and Venture Capital Funds (1994-2022) (Spectra Investments)

Summary

• The final sample analyzed consists of 387 funds (232 PE and 155 VC) that raised a total of BRL 181 billion (approximately USD 63 billion).p.2
• The combined mean net IRR in BRL for Brazilian PE and VC funds raised between 1994 and 2022 was 12.7%, with a mean TVPI of 2.2.p.2
• Venture Capital funds outperformed Private Equity funds in BRL, achieving a mean net IRR of 15.6% and TVPI of 2.6, compared to a mean IRR of 10.7% and TVPI of 2.0 for PE funds.p.2
• Currency devaluation significantly impacted returns in USD, reducing PE mean net IRR to 3.7% and VC mean net IRR to 11.3%.p.2
• Cumulative called capital from 1994 to 2022 reached BRL 180.8 billion (USD 63.2 billion), while distributed capital totaled BRL 151.9 billion (USD 49.6 billion).p.4
• Over the 1999–2022 period, Brazilian PE and VC funds outperformed public market benchmarks, returning an average of 1.2 times IBOVESPA, 1.5 times MSCI EM, and 1.1 times CDI.p.7

Key insights

1. VC fund creation grew significantly after 2013 and surpassed the number of PE funds raised annually starting in 2019.p.2
2. The disparity between top-quartile (Q1) and bottom-quartile (Q3) net IRR reached 21.9% for PE and 30.7% for VC funds, emphasizing manager selection criticalities.p.2
3. Top-quartile (Q1) funds showed strong resistance to Brazilian Real devaluation, generating positive net returns in USD across virtually all vintages.p.2
4. CVM-regulated vehicles (FIPs) make up 59% (228 funds) of the dataset, while the Spectra Insper database contributed 41% (159 funds).p.3
5. Private Equity accounted for 84% of total called capital (BRL 152.5 billion) and 85% of total distributions (BRL 129.3 billion) between 1994 and 2022.p.4
6. Fund-level diversification significantly reduced write-off risks, as total fund losses (IRR below -50%) occurred in only 3.1% of PE funds and 0.6% of VC funds.p.6
7. Scalability in tech allowed 9.7% of VC funds to generate BRL net IRRs exceeding 50%, compared to only 4% of PE funds.p.7
8. Currency devaluation increased the proportion of funds experiencing negative USD net IRRs to 37.0% for PE and 32.5% for VC.p.7
9. For mature funds older than ten years, VC funds generated a BRL mean DPI of 2.1 compared to 1.6 for PE funds.p.10