Brazil Funds Gaining Strength

Data on the performance of Brazilian private equity is thin, but Spectra-Insper says it has evidence of recent momentum.

This is what the development of an asset class in an emerging market looks like – sparse and fragile at first, with strengthening numbers as the years go by.

Or at least that is the analysis of Spectra-Insper, a partnership between Brazil’s Strategy Center of Insper and Spectra Investments, which has built a database of private equity funds across Latin America. For the Brazilian market, Spectra-Insper says it has information on 172 funds from 78 separate firms.

The overall average gross IRR of the Brazilian funds tracked is 22 percent. Spectra-Insper says that performance between 1990 and 1998 was weaker than US private equity funds during the same period. But the period between 1999 and 2008 saw a string of successful Brazilian PE fund performances, albeit small in numbers, comparatively.

In a recent white paper, Spectra-Insper chalked up this later, stronger performance to: “(1) the Brazilian economic boom between 2004 and 2012 (2) still limited competition for deals in Brazil and (3) the fact that Brazilian PE and VC managers are becoming more experienced, thus allowing for better performance.”

One of the most vexing issues of investing in the emerging markets is the lack of performance data, allowing global investors to benchmark performance not only among managers within the country but against other markets.

But as is well known to investors in the most developed markets, collecting performance data from GPs is difficult. Spectra-Insper says it has built a database using “data collected from PPMs and from interviews.”