Performance of the Private Equity and Venture Capital Industry in Brazil (1990-2013) (Spectra Investments)

Summary

• Brazil captured the largest portion of Latin American fundraising, accounting for 83.8% in 2011 and 64.9% in 2012.p.2
• The study analyzes a database of 172 funds raised between 1990 and 2013, with performance evaluated for 46 funds with vintage years from 1990 to 2008.p.2
• Private equity and venture capital funds in Brazil generated average gross invested capital returns of 3.6×, with a median of 2.5×.p.3
• The overall sample yielded a mean gross internal rate of return (IRR) of 22% and a median gross IRR of 23.5%.p.7
• More than 40% of Brazilian IPOs were estimated to be backed by private equity firms.p.11

Key insights

1. The Brazilian private equity and venture capital industry is maturing, with 72% of firms having operated for 5 years or more as of vintage year 2008.p.6
2. Private equity funds dominate the analyzed sample performance dataset at 69.6%, while venture capital represents 21.7% and mezzanine/infrastructure represents 8.7%.p.7
3. Performance shows a significant spread between top and bottom performers, with a mean IRR gap of around 72% between the top and bottom quartiles.p.7
4. Funds focused exclusively on Brazil produced a slightly higher IRR than geographically diversified funds, though the difference is not statistically significant.p.8
5. Buyout funds achieved superior returns compared to growth capital funds in the analyzed sample, though the variation was not statistically significant.p.8
6. Estimates based on GP interviews suggest that net returns in Brazil equal approximately 70% of gross returns due to fee structures.p.8
7. The performance of Brazilian private equity and venture capital funds shows higher cyclicality compared to U.S. funds over identical vintage periods.p.9
8. Institutional developments after 2000, including corporate governance listing segments and new bankruptcy laws, coincided with improved fund performance.p.11