Rio de Janeiro-based Bozano Investimentos is fundraising for their first US dollar denominated fund, Bozano Growth Capital Fund. The fund launched in March this year with a target of $300 million and a $350 million hard-cap, Priscila Rodrigues and Jaime Cardoso, partners at Bozano Investimentos told Private Equity International.
“The main reason is very attractive dollar valuation levels as reais-denominated valuations have gone down and the currency has depreciated,” Cardoso said. The Brazilian reais which currently stands at 3.61 per US dollar, sank to a low 4.07 per dollar last September, the weakest intraday level since the creation of the currency in 1994.
“The worst of the crisis has already happened,” he said of Brazil's recession.
The fund is looking to make four to eight investments with no more than 30 percent deployed in a single investment.
The fund will target investment in mid-market Brazilian firms focused in consumer goods, retail, services, healthcare, logistics and education sectors, seeking returns of 2-3x the multiple of invested capital, and targeting a net IRR in excess of 20 percent in dollars.
“On investment opportunities – several sectors present opportunities in Brazil. In education, similar to the healthcare industry, there are segments – such as thematic post-secondary – that are still in a developing phase,” Rodrigues said , adding that the consolidation of the hospital sector is a particular opportunity.
The fund is seeking LP commitments of $5 million however, Bozano may accept lesser amounts at its own discretion, according to material provided by the firm. The management fee is a two percent charge of committed capital with carried interest of 20 percent of the net profits, subject to an 8 percent return hurdle with catch up provisions. Bozano Investimentos and affiliates will contribute 10 percent to the growth fund.
Bozano's other funds include BR Educacional FIP II, which closed on its BRL 800 million ($224.4 million, €200 million) target in 2014. It has invested in medical preparatory education company MEDCEL . A separate team at Bozano manages two funds for venture capital.
The firm's first general fund, FIP Brasil Governanca Corporativa I, held a close on BRL 600 million. The fund has fully invested in four portfolio companies, among them Mexico-based energy and healthcare investment company ENESA and parking app Estapar Estacionamentos .
The firm exited health food retailer Hortifruti to Partners Group this January and education company Abril Educacao to the Government of Singapore Investment Corporation in 2014, generating a IRR for the fund in the 20s.
The private equity industry in Brazil is still in a nascent stage compared to the US and Europe, Rodrigues said. In Brazil, there are two groups of investors. The global players are focused on large deal transactions from $110 million to $170 million. A significant number of smaller local players, such Bozano Investimentos, are focused on middle market transactions from $25 million to $75 million, where local expertise is crucial, she said.
Bozano Investimentos has BRL 4.8 billion assets under management and also has offices in Sao Paulo and Recife.
In 2013, Bozano Group acquired a total 20 percent stake in private equity firm BR Investimentos, and asset management firms Mercatto and Trapezus, merging the firms into Bozano Investimentos. The firm is a partnership, in which the remaining stakes are owned by executives of the company. Bozano offers services and products in the areas of private equity, real estate, structured finance, fixed income and public equities.