Category: Funds

Despite a 9.33% rally in the week to September 25, dedicated LatAm equity funds posted outflows for the 16th consecutive week, according to data from Lipper and EPFR Global, respectively. LatAm equity funds lost $650m in the week, the worst since late January, compounding a string of outflows. This was less than the exodus from EMEA but bigger than the loss from Asia, says EPFR. The LatAm equity fund rebound was bigger than any other fund class monitored by Lipper, but the asset class is still down more than 23% year to date. Losses have been steep in recent weeks and the market looks set to remain volatile.

International PE firm Advent has acquired Frango Assado, a popular chain of roadside restaurants in Brazil that specializes in, among other things, rotisserie roasted chicken. The deal, heard at around BRL170m, is Advent’s third LatAm acquisition in a month, and was purchased using a substantial amount of leverage, say officials at the firm. “In the last 18 months we’ve been very concerned about asset prices,” Martin Escobari, the MD at Advent who worked on the deal, tells LatinFinance. He notes that Advent, which in LatAm invests from a $1.3bn dedicated fund, has been less active during that period than many of its local competitors. “Now with the stock prices lower, valuation expectations have come down and prices are becoming more realistic,” he adds. Advent recently purchased Aerodom, in the DR and Quero-Quero, a retailer in Brazil. Frango Assado is the third Brazilian restaurant company it has bought. Like the Vienna and Grupo RA chains, Frango Assado is being rolled up into the International Meal Company, a LatAm restaurant holding firm controlled by Advent that also includes two chains in Mexico and one in Puerto Rico.

LatAm equity funds saw an outflow of $364.4m in the week ended September 17, bringing net YTD flows to a negative $3.16bn, according to EPFR Global. Equity cash under management for the region has dropped to $31.6bn from $41.0bn at the beginning of the year, marking the largest fall in AUM of all EM regions it tracks. Brazil equity outflows in the week were $117.1m, which brought AUM to $9.1bn, with YTD flows marginally positive at $56.5m. Sellside firms are calling for a reversal of this trend in Brazil, citing excessive bearishness driven by fears of a drop in commodities.

Fitch has put the BBB rating of Aracruz Celulose on rating watch negative after its takeover by VCP to form a leading global producer of market pulp. Fitch says it is likely to downgrade Aracruz to BBB minus at the conclusion of a merger. “For the past five years, the average net debt-to-Ebitda ratio of Aracruz has been 1.6x, which is significantly lower than the 2.5x ratio the new company is expected to maintain,” says the agency. The combined firm will nonetheless enjoy both economies of scale and a cost structure that is unrivaled, says Fitch. VCP agreed to acquire a 28% stake it does not own of Aracruz. Votorantim, VCP’s parent, and Grupo Safra, a financial investor in Aracruz, will jointly control the shares in the new company with a 50% stake, while VCP will own the rest.

Brazil’s Votorantim Celulose e Papel (VCP) has agreed to acquire a 28% stake it does not own of Aracruz, opening the way for the creation of one of the top two paper and pulp companies in the country, alongside Suzano. Grupo Votorantim, VCP’s parent, and Grupo Safra, a financial investor in Aracruz, will jointly control the shares in the new company with a 50% stake, while VCP will own the rest. The move follows a similar divestiture by the Lorentzen Group in August, which also held a 28% stake in Aracruz. Safra had the right of first refusal to the stake, but would have had to make a bid for an additional 28% were it to control Arazruz. It will now remain a financial investor in the company, to be operated by VCP. Safra will pay some BRL530m for its share in the new company. JPMorgan advised Safra, Credit Suisse advised Lorentzen Group, and Signatura-Lazard is advising Suzano. Estater advised VCP.

Following 12 weeks of consecutive outflows, Brazil equity funds clawed back $18.5m in the week ended September 3, according to EPFR Global. The inflows into the funds tracked by the service came despite a drop in performance of 5.4% during the period. The Ibovespa sank 8.8% in the 5 sessions through September 3. YTD flows are also positive for Brazil, with a net gain of $191.1m and total AUM of $11.7bn. Unlike Brazil funds, LatAm equity continued to lose cash in the period, seeing outflows of $88.6m, which brought AUM to $40.1bn. In the year, LatAm equity has seen drainage of $2.4bn, says EPFR.

Guatemalan investment manager Admira has launched the country’s first PE fund, Guatefondo, with an issuance of $25m shares on the local exchange, Admira’s administrative manager Jorge Flores tells LatinFinance. The sale of 25,000 units at $1,000 a share constitutes Guatefondo’s first round of financing. Depending on the results, other financing rounds are likely, Flores says. Guatefondo seeks to invest between $200,000 and $5m in medium-sized companies in the technology, tourism, energy, agriculture and real estate sectors in Guatemala, Flores adds.

LatAm equity funds continued a 12-week losing streak last week, taking total redemptions to $4.1bn in that period, says EPFR Global. All other major EM equity funds suffered, with EMEA losing most. “Since the second week of June EPFR Global-tracked emerging market funds have surrendered a net $23.1bn,” says the fund tracker. “Appetite for exposure to emerging markets has been eroded by a sharp correction in commodity prices during 3Q08, a string of downward revisions to economic growth forecasts and painfully high inflation rates in several key markets,” it adds. Meanwhile, EPFR Global-tracked EM bond funds had their worst week in over a year during late August. “Weighing on investors are concerns about the impact of lower commodity prices on the two biggest country allocations – Russia and Brazil – in the average fund portfolios,” says EPFR.