Client Case Study: Private Trust Group

Recently our firm was retained by a private trust group with $2.5 billion in invested capital. The trust has historically been extremely conservative in their investment approach and risk exposure profile with 100% of their assets being invested in mature economies. Recognizing the significant long-term growth potential that developing economies and the new consumer will create the investment committee of the Trust Group has made a decision to shift up to 35% of their capital into developing economies with a focus on India and Brazil.Noting the conservative nature of the group our firm was instructed to identify and assess local PE funds that could be used as vehicles for their investments in these markets. Additionally investments with other strategic investors would also be considered on a case by case basis. The IRR that the group was expecting was 25% with a total investment horizon of 5 years. The group also wanted to insure that their tax liability exposure would be minimized.

The Challenge

While there are numerous funds operating in these markets many of them either lack a strong country specific track record or they are so large as to make their investment profile onerous to local companies seeking investment capital (majority control, drag along rights etc.). While many deals require significant capital this scale can be achieved by creating a consortium of funds when required. Additionally as the economies of Brazil and India continue to expand may local high value companies are balking at giving up a significant amount of equity as a robust IPO market is now providing an attractive exit for them. The net result is that a number of significant investment opportunities are often overlooked or deferred.

The Solution

Using our defined approach to market assessments we are now identifying, assessing and quantifying the value proposition of a universe of local funds that have assets under management of $500MM or less and that have expressed interest in developing a new fund. This assessment requires in-depth interviews with the fund principals and the management of portfolio companies. Additionally the funds that we identify will have variances in their investment strategy and focus which will serve to minimize our client’s exposure to any specific asset class. Legal support for due diligence and tax strategy is being provided by best in class local law firms to include; L.O Baptista and FoxMandal Little.