This article provides a comprehensive review of the performance of Brazilian Private Equity (PE) and Venture Capital (VC) funds raised between 1994 and 2022. The data for this study were sourced from both the CVM (Brazil’s Securities and Exchange Commission) and Spectra Investments’ proprietary databases. We have deliberately excluded real estate, oil and gas, and infrastructure funds from our analysis. Additionally, funds that serve as investment vehicles for family holdings or focus on single-asset investments were also omitted.

The final sample consists of 387 funds, including 232 Private Equity (PE) and 155 Venture Capital (VC) funds. Collectively, these funds have raised a total of BRL 181 billion (approximately USD 63 billion)* [1]* in funding.

This report is a collaborative effort between Insper, a leading educational and research institution in Brazil; Spectra Investments, a main investor in Latin American illiquid assets; and ABVCAP, the Brazilian Venture Capital Association.

Our main findings are:

- PE and VC investments have proven to be profitable in local currency. The mean net IRR in BRL for the combined PE and VC funds between 1994 to 2022 was 12.7%, and the mean TVPI was 2.2.
- The number of VC funds has been gaining prominence in the fundraising market since 2013, and starting from 2019, it has surpassed the number of PE funds.
- VC funds have outperformed PE funds during the analyzed period. The mean net IRR of VC in BRL was 15.6% and the mean TVPI was 2.6, compared to a mean IRR of 10.7%. and a mean TVPI of 2.0 for PE funds.
- Both PE and VC demonstrated robustness in BRL since 2011. Despite the Brazil’s economic turbulences, the lowest mean IRR for PE was 4% (2012), and for VC it was 6,6% (2021).
- Over half of the funds with a lifespan of ten years or more boast a DPI (Distributed to Paid-In) ratio greater than 1.0, signifying that they have not only returned the invested capital but have also generated a profit. Specifically, this applies to 57% of private equity (PE) funds and 62% of venture capital (VC) funds. As the mean TVPI is higher than DPI for almost all of those vintages, there is more to be distributed.
- The disparity between the lowest IRR in the top quartile (Q1) and the lowest in the bottom quartile (Q3) during the 1994-2022 period was 21,9% for PE and 30.7% for VC. This highlights the importance of carefully selecting the fund manager for both kind of funds,
- The Brazilian Reais devaluation negatively impacted the PE and VC industry performance, and this impact was stronger for PE funds. The mean IRR of PE funds in USD drops to 3.7% and the TVPI to 1.5, while the mean IRR in USD of VC decreased to 11.3%, and the TVPI to 2.3.
- Top-quartile (Q1) funds demonstrated resilience to currency devaluation, delivering positive returns in USD across all vintages for both Private Equity (PE) and Venture Capital (VC), with the exception of 2008 for PE. After 2014, the lowest IRR for Q1 funds was 16.8% for PE (2014) and 12.7% for VC (2021).
- PE and VC funds outperformed public equivalent alternatives: IBOVESPA, CDI and MSCI EM.

We selected all funds, known as *Fundos de Investimento em Participações* (FIPs), listed in the *Comissão de Valores Mobiliários* (CVM), the Brazilian Securities Exchange Commission. These are classified as Private Equity (PE) or Venture Capital (VC) by the Brazilian Private Equity Association (ABVCAP)*[2]*. We complemented this dataset with funds from the Spectra Insper database, which includes funds dedicated either to Brazil or to Latin America with investments in Brazil. The added funds were either raised before 2003 or did not use CVM-regulated vehicles for investing in Brazil.

Furthermore, we aggregated FIPs used as investment vehicles for offshore funds*[3]* into portfolios that represent the underlying funds’ investments in Brazilian companies. We treated these portfolios as if they were independent offshore funds focused on Brazil. The final sample, after excluding funds with inconsistent or missing data, oil and gas, and single-asset funds, comprises 387 funds raised between 1994 and 2022. FIPs with data collected from CVM make up 59% (228) of the sample, while funds with data collected from the Spectra Insper database constitute 41% (159).

We estimated the cash flows from capital calls, capital distributions, and the market value of the invested fund portfolios based on their financial statements as of December 2022. Based on these estimated cash flows, we calculated the following metrics for net returns*[4]*: Total Value to Paid-in (TVPI)*[5]*, Distributed to Paid-in (DPI)*[6]*, Internal Rate of Return (IRR) and Public Market Equivalent (PME)*[7]*. For performance metrics in USD, we converted the monthly cash flows from BRL to USD using the monthly average bid exchange rate quoted by the Brazilian Central Bank.

A TVPI higher than 1.0 indicates that investors would see positive returns if the fund were liquidated at its December 2022 market value. For example, a TVPI of 2.0 means that investors would receive twice their invested capital. A TVPI lower than 1.0 suggests negative returns, meaning investors would receive less than they initially invested.

DPI is the ratio of distributed capital to called capital. A DPI greater than 1.0 means investors have received back their invested capital with a profit, whereas a DPI lower than 1.0 indicates that only part of the invested capital has been returned.

The difference between TVPI and DPI reflects the market value of the investment still held in the fund’s portfolio, which has not yet been divested. For example, a TVPI of 1.5 means that each $1.0 invested is worth $1.5. If the corresponding DPI is 0.7, the unsold investments in the portfolio have a market value of $0.8 (i.e., $1.5 – $0.7).

Public Market Equivalent (PME) is a metric used to compare a PE/VC investment with a public market index. The PME is always referenced to a benchmark; for example, PME IBOVESPA means the benchmark is IBOVESPA, the most well-known Brazilian stock market index. PME CDI references the CDI, the Brazilian Libor, and PME MSCI EM references the MSCI EM index, which is composed of the largest stocks from major emerging markets. If the ratio of proceeds from PE/VC investments to public investments is greater than one, the PE/VC investment outperformed the benchmark; if the ratio is less than one, it underperformed.

The number of PE (Private Equity) funds raised during the period from 1994 to 2022 (see Figure 1) was greater than the number of VC (Venture Capital) funds, with 232 and 155, respectively. However, VC fundraising has been on the rise since 2011 and has surpassed PE fundraising in terms of the number of funds since 2019.

Figure 2 shows the total capital called and distributed by fund vintage, measured in BRL billion. The low or zero distribution observed since 2018 aligns with funds that are younger than 4 years old and are likely still in their investment period.

The sum of the called capital during the period from 1994 to 2022 amounted to BRL 180.8 billion (USD 63.2 billion), while the distributed capital reached BRL 151.9 billion (USD 49.6 billion). Private equity funds accounted for 84% of the called capital during this period, equivalent to BRL 152.5 billion (USD 55.4 billion), and for 85% of the distribution, equivalent to BRL 129.3 billion (USD 43.4 billion).

**Figure 1. Number of Private Equity and Venture Capital Funds raised by vintage**

**Figure 2. Amount of Capital Called and Distributed by Funds’ vintages (BRL billion)**

On average, the Private Equity (PE) and Venture Capital (VC) industry in Brazil performed well in BRL from 1994 to 2022. It delivered a mean net IRR of 12.7% and a mean TVPI of 2.2 (see Table 1). Consistent with previous reports, VC funds generally outperformed PE funds. Specifically, the mean IRR in BRL for VC was 15.6%, compared to 10.7% for PE, while the mean TVPI for VC was 2.6 and for PE was 2.0.

Currency devaluation had a negative impact on the industry’s performance, causing the mean IRR in USD to drop to 6.9% and the TVPI to fall to 1.8. The PE industry was most affected: the mean IRR in USD dropped to 3.7%, and the mean TVPI fell to 1.5, The VC industry proved to be more resilient: mean IRR dropped to 11.3%, and mean TVPI decrease to 2.3.

The weighted average IRR estimated for the period from 1994 to 2022 was higher than the mean IRR (equally weighted) for both Private Equity (PE) and Venture Capital (VC) in both currencies. However, for PE funds, this trend is not consistent across vintages (See Exhibit 2 in the Appendix).

The IRR disparity between the top and bottom quartiles in Brazil is significant at 25.3%, emphasizing the need for judicious selection of fund managers. Notably, the gap is wider for VC than for PE, at 30.7% compared to 21.9%. This pattern holds true across the majority of vintages (see Appendix 3).

**Table 1. Performance statistics for the period 1994-2022**

Figure 3 displays the mean IRR and the lowest IRR of top-quartile (Q1) funds in BRL for both Private Equity (PE) and Venture Capital (VC) across vintages from 2011 to 2021*[8]*. For PE, the lowest mean IRR was 4% in 2012, demonstrating the asset class’s resilience to Brazil’s economic challenges. On the other hand, excluding 2021—when the fund’s one-year lifespan was too short for portfolio construction—the lowest mean IRR for VC stood at 13.1% in 2020. This figure aligns with VC’s lower susceptibility to economic downturns and mirrors both the global and local surges in the technology sector.

Q1 PE funds performed commendably across vintages from 2011 to 2020. The weakest performance was a 14.5% IRR, while the strongest soared to 159% (Table 1), suggesting a set of general partners skilled at maneuvering through economic turbulence. For Q1 VC funds, performance was even more robust during the same period; the IRR ranged from a low of 25% in 2020 to a high of 191%.

Figure 4 provides the same statistics as figure 3, but in USD. The currency devaluation impact on performance was stronger for PE than for VC. The mean PE IRR was negative in vintages 2011, 2012 and 2013, while it has not gone negative for VC in any vintage between 2011 – 2021, confirming Venture Capital resilience to currency risk. First quartile funds delivered positive returns in USD in all vintages for both PE and VC. PE top quartile IRR had a minimum of 0.6%, while for VC the lowest was 12.7% in 2021. The maximum IRR for PE in USD was 92.0%, while it was 191.4% for VC, even higher for the maximum IRR for VC in BRL. Therefore, we observe that first quartile funds delivered consistent returns in USD even with the currency devaluation.

Figure 5 depicts the distribution of Net IRR in BRL for both Private Equity (PE) and Venture Capital (VC) funds. Extreme losses in PE funds (with IRRs below -50%) accounted for 3.1% of the sample, a percentage higher than that of VC funds, where it was only 0.6%. Remarkably, only one PE fund experienced a total loss, whereas the lowest IRR recorded for a VC fund was -95%. These results contrast sharply with the findings from our report of deal performance published in October 2022*[9]*, where we reported a total loss in 41% of VC deals and 9% of PE deals. This divergence underscores the risk mitigation achieved through portfolio diversification at the fund level.

In terms of outstanding performance, 14.6% of PE funds and 25.3% of VC funds achieved an IRR exceeding 30%. Consistent with the scalability inherent in VC deals, 9.7% of VC funds posted an IRR higher than 50%, compared to just 4% for PE funds.

Figure 6 presents the distribution of Net IRR in USD terms. Due to the devaluation of the Brazilian Real, the percentage of funds recording losses increased to 37.0% for PE and 32.5% for VC. Meanwhile, the percentage of funds with outstanding returns (an IRR above 30%) dropped to 9.3% for PE and 17.5% for VC.

On average, Private Equity (PE) and Venture Capital (VC) funds outperformed comparable investments in liquid assets, as evidenced in Figure 7. In the period from 1999-2022, Brazilian PE and VC funds returned an average of 1.2 times the equivalent investments in the IBOVESPA index, 1.5 times that in the MSCI Emerging Markets (MSCI EM), and 1.1 times comparable investments in the Brazilian Libor (CDI). This outperformance was consistent across both PE and VC asset classes and was observed in the majority of vintages.

**Figure 3. Mean and Top Quartile (Q1) Net IRR by Vintage (BRL) **

**Figure 4. Mean and Top Quartile (Q1) Net IRR by Vintage (USD)**

**Figure 5. Distribution of Net IRR (BRL)**

**Figure 6. Distribution of Net IRR (USD)**

**Figure 7. Public Market Equivalent (PME) across Vintages According to Different Benchmarks**

The liquidity of both Private Equity (PE) and Venture Capital (VC) funds has improved since our last fund performance report, which was published in June 2022*[10].* For PE funds (Figure 8), vintages from 2015 or earlier have, on average, returned the invested capital along with a profit.

The exceptions are the vintages from 2008, 2010, and 2011, which each had a mean Distribution to Paid-In (DPI) ratio of 0.9. VC funds exhibit a similar trend (Figure 9): vintages prior to 2015 have generally distributed the invested capital along with a profit. The exceptions here are the vintages from 2007, 2009, and 2015, which had mean DPI ratios of 0.9, 0, and 0.9, respectively.

For Private Equity (PE) funds established in 2012 or earlier—which have had more than a decade of operational history as of 2022—the mean Distribution to Paid-In (DPI) in BRL stood at 1.6. Notably, 57% of these funds distributed the invested capital with a profit, and 44% yielded more than 1.5 times the invested capital.

For Venture Capital (VC) funds, the mean DPI in BRL for funds ten years old or elder was even higher, at 2.1. Moreover, 62% distributed the invested capital with a profit, with nearly half (48%) achieving returns exceeding 1.5 times the called capital.

When assessed in USD, VC funds generally performed better than their PE counterparts. For VC funds established in 2012 or earlier, the mean DPI in USD was 1.3. Over half of these funds (52%) returned the invested capital with a profit, and 38% did so with returns greater than 1.5 times the invested capital.

PE funds were more adversely impacted by currency devaluation. For these funds with a lifespan of ten years or more, the mean DPI in USD was 1.2. Only 38% managed to distribute the invested capital with a profit, and a mere 19% achieved returns greater than 1.5 times the invested capital.

**Figure 8. Mean PE DPI and TVPI across vintages (BRL)**

**Figure 9. Mean VC DPI and TVPI across vintages (BRL)**

Between 1994 and 2022, both Private Equity (PE) and Venture Capital (VC) proved to be profitable investments. The mean Internal Rate of Return (IRR) for this period was 10.7% for PE and 15.6% for VC. Notably, both asset classes outperformed the IBOVESPA, CDI, and MSCI Emerging Markets (EM) indices. More than half of the funds with 10 years old or elder distributed the invested capital with a profit: 57% of the PE funds and 62% of the VC funds.

Despite economic volatility in Brazil, both PE and VC funds maintained consistent performance in BRL. Furthermore, post-2011, the mean IRR remained positive across all vintages.

VC funds, in particular, were resilient against the devaluation of the Brazilian Real, with a mean IRR in USD of 11.3%. The mean DPI for VC funds with 10 years old or elder was equivalent to 2.1.

The PE industry was more adversely affected by currency devaluation. However, top-quartile PE funds demonstrated resilience—though less so than in our previous reports. These top-performing funds have consistently shown positive returns across vintages, and since 2014, their IRR has exceeded 16.8%.

**Appendix 1. Net Performance for private equity and venture capital funds by vintage (IRR BRL)**

Weighted average was estimated based on Capital Called.

**Appendix 2. Net Performance for private equity funds by vintage (IRR BRL)**

**Appendix 3. Net Performance for venture capital funds by vintage (IRR BRL)**

**Appendix 4. Net Performance for private equity and venture capital funds by vintage (IRR USD)**

**Appendix 5. Net Performance for private equity funds by vintage (IRR USD)**

**Appendix 6. Net Performance for venture capital funds by vintage (IRR USD)**

**Appendix 7. PME private equity and venture capital funds according to different benchmarks and vintages**

**Appendix 8. Capital Called and Distributed in BRL thousands across vintages**

**Appendix 9. Distribution of Private Equity and Venture Capital Performance during 1994-2022**