Reuters — Brazil Buyout Sector Seeks Investment from Insurers, Pension Funds

(Reuters) – Brazilian private equity funds are pushing ahead with a plan to win investment commitments from insurers and pension funds that are seeking higher returns on over 1.1 trillion reais (about $550 billion) of money under management.

ABVCAP, as the group representing private equity funds is known, is engaging insurance and pension fund industry regulator Susep in talks to ease caps on investments other than fixed-income securities, said Clovis Meurer, ABVCAP’s president.

Talks with money managers are also underway, he said, adding that the goal is to get pension funds and insurance companies to
funnel up to 15 percent of their investment pool into equities and other alternative investments. A small portion of that could go to private equity and venture capital investments, he added.

“You could have a little over 100 billion reais flowing into equities and, as a result, being spilt over to private equity and venture capital,” Meurer said at a news conference at ABVCAP’s annual summit in Sao Paulo. “This could be a win-win situation for the market.”

The move underpins the growing importance of private equity funds as a source for business in Latin America’s largest economy. Buyout firms have fueled mergers and acquisitions and advisory activity in the past two years, and have responded to this year’s only two initial public offerings.

Traditional investors like pension funds are also struggling to attain minimal return thresholds as interest rates fell to record lows. ABVCAP’s Meurer also expects the drive to lure insurance and pension fund money to help bolster the 80 billion reais in the stock of capital committed by the private equity industry.

According to Luiz Eugenio Figueiredo, a board member for ABVCAP, capital committed by buyout firms rose from 63 billion reais in 2011.

Exits, or the way funds profit on their investments by selling companies to other investors, almost doubled to 6 billion reais last year from 3.6 billion reais in 2011.

(One real is equal to $0.4999, according to Yahoo’s currency converter.)

By Guillermo Parra-Bernal, Reuters