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Coronavirus crisis could reignite LatAm GP-led opportunity

2020 was set to be a good year for exits in LatAm, and covid-19 is forcing GPs to consider other options, according to Brazil's Spectra Investments.

The damage wrought by covid-19 on Latin America’s capital markets could create a secondaries opportunity, according to Brazilian investment firm Spectra Investments.

Funds of 2008-2014 vintage, a period of strong inflows into the region’s private equity market, are being forced to consider options that would not have been deemed necessary six months ago, partner Renato Abissamra told Secondaries Investor.

“[The year] 2020 would have been a year of exits in Brazil: everyone was very positive. The capital markets were hot, the M&A market was hot, interest rates were at the lowest-ever level. In this environment, GP-led transactions tend to be off the table, but with covid that has changed.”

Fundraising by Latin American private equity funds peaked in 2011 and 2014, exceeding $10 billion in those years, according to data from regional private capital association LAVCA.

São Paulo-headquartered Spectra closed Spectra Latin America Private Equity IV at the start of this year on 910 million reais ($168 million; €150 million), above its target of 800 million reais, Abissamra said.

Fund IV is 60 percent invested across primaries, secondaries and co-investments and is expected to be more than 80 percent deployed by the end of the year. It has backed three GP-led transactions so far.

Secondaries Investor reported in June last year that Spectra had returned to market with the vehicle.

Covid-19 has put on hold the plans of international investors to commit to funds in Latin America, Abissamra said. International investors account for around 10 percent of limited partners in Fund IV and are unlikely to increase as a proportion in Fund V.