Company creates tool to support investment decisions
December 06, 2017
By Claudia Izique | FAPESP Research for Innovation – Private equity funds invest in companies that are not listed on stock exchanges. In Brazil, the private equity industry has grown an average of 23% per year since 2007 and held corporate investments amounting to more than R$100 billion in 2017.
While the stock market offers tools to find quotations for the 400-odd listed companies, fund managers and administrators must search many databases for information on more than 1,000 closely held firms, including sources such as the Federal Revenue (RFB), the Administrative Economic Defense Council (CADE, Brazil’s antitrust authority), and the Securities & Exchange Commission of Brazil (CVM), among others. Investors in turn must look for information on more than 250 managers of 550 funds in operation in order to decide whether they trust them and whether they could earn a worthwhile return on investment.
“I realized that this market, which also includes venture capital and real estate, among other segments, required an online platform that aggregates and tracks information on funds, asset managers and companies from the participant’s viewpoint,” says Leonardo de Lima Ribeiro, founder and CEO da Private Equity Bay (Pebay), the firm he set up specifically to fill this information gap.
Having graduated with a degree in business administration from the University of São Paulo (USP) and completed a course of specialization in corporate finance at Toulouse Business School in France, Ribeiro decided to become an entrepreneur after working for 13 years in the private equity and venture capital industry. He set up Pebay in 2013 with support from the PIPE/PAPPE Grant Program, the result of an agreement between FAPESP and the Brazilian Innovation Agency (FINEP) to help firms bring innovative initiatives to market.
Before founding Pebay, Ribeiro designed and managed Brazil’s first private equity/venture capital fund of funds, evaluating more than 40 institutions per year. In this undertaking, he had to be creative, discovering ways and means of obtaining the information needed to assess a manager or fund independently.
“I found that many investors and managers operated in this market without proper information and decided to create a platform to offer this intelligence to the market. Pebay was born from the experience – and risk – of investing without a reliable independent source of information on funds and managers,” Ribeiro recalls, referring to his experience as a researcher at Getúlio Vargas Foundation’s Private Equity Research Center (CEPE-FGV) and a fund manager accredited by CVM.
The platform developed by Pebay offers financial performance metrics and analysis regarding funds and deals in Brazil, enabling subscribers to use this information to help make important investment decisions.
For example, the system provides information on cash flow, risk and return rates, management, and investors’ moves, all based on audited reports, among other kinds of decision-support data. In the case of fund managers, the platform even gleans information from LinkedIn.
“In addition to the cutting-edge technology we use, all the information we provide is curated, treated and analyzed artisanally by specialists, since our clients make high-value, high-impact decisions. New information is added to the platform every single day,” Ribeiro says.
He adds that the platform is also “ready” to comply with CVM Instructions 578 and 579, which as of 2017 require investment entities, including private equity funds, to book equity holdings at fair value so as to assure full comparability between investments.
“The PIPE/PAPPE Grant has enabled us to assemble this jigsaw puzzle,” Ribeiro says. This month the platform was officially launched and is already being presented to fund managers, investors and banks. “It’s been very well received,” he stresses.
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