It is known that the Latam Private Equity industry has been successful, with funds achieving a mean IRR of 23% p.a. in US$. But what is the difference between the Top and Bottom quartiles? Is it important to be geographically-focused? Buyout funds outperform growth funds?
The Spectra-Insper database shows that the difference between top and bottom quartiles in terms of mean IRR is around 72% p.a.. While the top quartile return is 58% p.a., the bottom quartile return is -14% p.a.
We also discovered that funds operating exclusively in Brazil have had a higher IRR when compared to geographically diversified funds with an outperformance of 2% to 13% if you use the mean or median. The sample is comprised approximately 50%-50% of each group.
Buyout funds outperformed growth funds in the period analyzed, but the difference in performance is not statistically significant.
Private Equity return on capital is higher than Venture Capital’s for funds raised between 1990 – 2008. The mean gross MoM of VC funds is 2,7x versus a MoM of 3,7x in PE funds.
These data show that although Private Equity was successful, the choice of the right strategy is crucial for investor return.