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Slowdown in Brazil-Focused Private Equity Fundraising – October 2015

by Ayush Varma

  • 22 Oct 2015
  • PE

Once touted as a budding economic superpower, Brazil’s fortunes have begun to turn. An amalgamation of falling commodity prices and a stuttering economic showing by China, its principal trade partner, have tipped Latin America’s largest economy into a recession. As a consequence, inflation has hit a decade-long high of 10%, unemployment is nearing 8% and Standard & Poor have downgraded Brazil’s credit rating. Unsurprisingly, the mounting economic and political problems have shaken consumer and investor confidence.

2011 saw Brazil-focused fundraising collect an impressive $11bn, yet Brazil-focused private equity fundraising has been stumbling ever since. According to Preqin’s Funds in Market online service, Brazil-focused funds have raised $3.7bn so far this year. As we approach the end of the calendar year, 2015 threatens to be one of the lowest for Brazil-focused private equity fundraising in terms of both the number of funds and aggregate capital raised.

P2Brasil III is the largest Brazil-focused vehicle to have closed so far in 2015, collecting $1.6bn. The fund targets greenfield, brownfield and secondary stage assets across a range of sectors. Along with P2Brasil III, BTG Pactual Brazil Timberland Fund ($860mn) and Patria Brazil Real Estate Fund III ($512mn) rank as the largest funds closed in 2015 so far.

Multinational private equity firm Carlyle Group is the only GP based outside Brazil to have closed a Brazil-focused fund this year. The firm closed its second and largest Brazil-focused vehicle, Carlyle Brazil Fund II, on BRL 700mn, falling short of its BRL 1bn target. The majority of this capital was raised by Brazil-based LPs; the fund is looking to make buyout investments across a wide range of sectors. Carlyle Brazil Fund II is one of two buyout vehicles to have closed this year; Stratus Capital Partners fund the other. Stratus Capital’s vehicle is sector agnostic and as of June 2015, has called a quarter of its $120mn war chest.

Canada’s Brookfield Asset Management is on the road again with its largest Brazil-focused fund to date. Brookfield Brazil Agricultural Fund II is looking to raise $500mn, with a hard cap of $700mn, to acquire cattle ranches and convert them into sugarcane or soybean farms. The fund is one of 40 Brazil-focused funds in market, half of which are either real estate or growth vehicles. With a potential $8.6bn to raise, Brazil-focused fund managers still seem optimistic of collecting capital from LPs.

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