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Rio Bravo sheds light on blind pool fund

The Brazilian asset manager has committed its entire energy-focused private equity fund, which has not yet reached final close, to numerous hydro and wind-power projects in Brazil.

Rio Bravo, a Brazil-based asset manager with about $2.9 billion under management, has recently committed $375 million, the target of its private equity energy fund still being raised, to several hydro- and wind-power projects in Brazil.

The fund is expected to hit its $375 million target and hold a final close in March, according to a person with knowledge of the fund.

The fund has ceased being a “blind pool”, and instead already has its investments mapped out, which has proven attractive to some limited partners in the fund, the person said. A group of pension funds in Brazil which made an initial commitment of $175 million last year kicked in more capital after the investments were revealed, the person said. The fund has also attracted capital from investors in the US and Asia.

“They were able to go into the fund before the final closing and know what the investments will be,” the person said.

The investments will allow the firm to lock in power contracts, which include a “current yield” aspect that guarantees periodic payment. In this case, the current yield is between 15 and 19 percent annually and will adjust for inflation, the person said. The fund also has a hurdle rate of between 12 and 16 percent that adjusts for inflation as well, the person said.

Rio Bravo’s energy fund is unique in that it includes among its investors a group of local Brazilian pensions that are not sitting on the investment committee, which has traditionally been a demand of Brazilian pensions.

The pensions instead are part of a supervisory board similar to an LP advisory committee.

“With this fund, we’ve been able to take a great step forward for the industry,” Russell Deakin, who is running fundraising for the firm in the US, told Private Equity International in a prior interview.