Search fund model in Brazil
January 26, 2019
by a searcher from University of Cambridge in Rio Claro, SP, Brasil
Are there any special way of presenting and convincing potential investors in a country where the search fund model is still on baby steps? How to better sell the model and / or convince some to invest?
When looking to the high yields provided by Brazilian capital markets, what would convince someone to invest on such an alternative investing?
from Norwegian School of Economics and Business Administration in Lisbon, Portugal
In terms of the fixed income crowding out alternative assets in Brazil, I would say it it a greater challenge for lower risk/lower return asset classes such as real estate and infrastructure.
I have not tried raising search funds in Brazil, but here are my two cents .
The Brazilian alternative investment landscape is quite a bit behind that of the US and Europe. My impression is that this is even more so when you look at the HNW/UHNW segment, as they traditionally have been more limited from investing in foreign funds.
This means that your key target segment in terms of fundraising will need quite a bit of educating before committing to the asset class. I would build my pitch around the fundamental benefits of the asset class and demonstrate why this applies particularly well for Brazil (ex. large number of small and medium sized businesses that are run in a "less than optimal way" with inefficiencies, lack of processes and limited access to foreign clients./markets).
You might actually find it easier to raise funding for Brazil from foreign search fund investors. In the end, Brazil is a market that is difficult to access for outsiders and there is definitely a "window of opportunity" in terms of pricing, FX and growth outlook right now.
Good luck,
Adrian
from Victoria University of Wellington in New Zealand
A group of us have got together to for a search fund association with the view of educating the investors (as well as business owners and intermediaries). One initiative is to run seminars to investors and their advisors on how search funds work, overseas research on risk and returns, their place in the alternative asset class (diversified portfolio), structures, search vs acquisition capital etc.
We are also discussing other ways to communicate about search funds along with addressing other challenges such as documentation, tax and searcher networking.
Perhaps your Brazilian associates could do something similar?
Cheers, Bruce.