A secondary market for stakes in private-equity funds is slowly developing in Brazil, boosted in part by the country's economic woes.
Although the market is still young, secondary purchases represent a sizable portion of the deals private-equity investors such as Hamilton Laneand Spectra Investments made in Brazil in recent years. Secondary deals accounted for about 30% of a fund of funds Hamilton Lane closed in 2013 with 145 million Brazilian reais (roughly $64.8 million at the time) that now is fully deployed, said Ricardo Fernandez, a managing director at the firm's Rio de Janeiro office who oversees Brazilian investments.
2014 and ensnarled the country's top politicians also contributed to their fears.
"Most of [those investors] were scared about the situation. They wanted to move toward more liquid types of investments," Mr. Fernandez said.
said Ricardo Kanitz, Spectra's managing partner.
bank Brasil Plural, he added.
Hamilton Lane also bought stakes in the same Vinci fund, according to documents filed with the Securities and Exchange Commission of Brazil, known as CVM.
Spectra has purchased private-equity stakes from various types of investors, including wealthy individuals, family offices, pension funds and development finance institutions, Mr. Kanitz said.
The firm expects secondary investments will represent about 36% of the portfolio of its current fund of funds, which closed on $96.6 million in 2017 and is about 84% invested, he added.
equity industry was beginning to gain traction and fundraising was robust, Mr. Kanitz said.
Brazil's firms raised a total of about $7.69 billion in private capital across 31 funds from 2006 to 2008, according to data from the Emerging Markets Private Equity Association.
New rules in Brazil requiring private-equity managers to value their funds' assets based on fair market value, instead of at cost, also is helping to lift the secondary market in the country, industry executives said. Enacted by CVM in 2016, the so-called instruction 579 has facilitated transactions by giving investors more clarity about the value of their stakes, the executives said.
selling stakes at a discount still is met with prejudice by some, and investment teams of public pension funds often find it difficult to approve secondary transactions, he said. Some local investors, he added, also have unrealistic expectations of what they can sell in the secondary market.
"There's no discount that can make up for a bad investment decision," he said.