3i to raise a Brazil focused-fund

London-listed 3i Group plans to raise a $500m Brazil-focused fund in the second half of next year. It is also reviewing executive compensation as it continues restructuring.

3i Group wants direct exposure to Brazil and its attractive demographics and plans to raise a separate vehicle for investments in the country, the firm said this week.

It is understood the $500 million Brazil Fund would target mid-market companies in the consumer and business services sector. The firm hopes to benefit from the increased consumer spending by a growing middle class, a source familiar with the matter said. In addition, the firm also plans to invest in Brazilian companies seeking to expand their operations into Europe, the source added.

Last April, 3i opened an office in Brazil. The firm made its first investment in the country in December last year, when it acquired cable TV group, Blue Interactive, for $55 million.

The announcement comes as 3i reported its half year results on Thursday. The firm significantly improved its gross portfolio returns from a £331 million loss ($525 million, €410 million) in the first half year of 2011 to a £180 million in surplus for the first half to 30 September this year.

Since the announcement of 3i's future strategy in June, we have wasted no time in implementing the significant organisational and cultural changes that are needed

Simon Borrows

Investments dropped however, from £448 million to £138 million as well as realisations, which fell from £532 million to £268 million in the first half. 3i Group’s chief executive Simon Borrows said the firm delivered “steady overall performance in the first half in what remain challenging economic conditions and subdued markets”.

3i Group reduced its gross debt from £1.72 billion to £1.25 billion as the firm continues a restructuring process it announced in June. 3i cut more than a third of its staff and announced office closures in Hong Kong, Shanghai, Copenhagen, Milan, Birmingham and Barcelona. It also reduced staff in Beijing, Madrid, Mumbai, New York and Singapore. The restructuring strategy would reduce 3i’s operational costs with more than £40 million, Borrows said at the time. 

3i also will review the way its executives are paid, the firm said, with the goal of providing an equitable split of returns between employees and shareholders. 

“Since the announcement of 3i’s future strategy in June, we have wasted no time in implementing the significant organisational and cultural changes that are needed,” Borrows said in a statement. “There is much more to do and we will continue to work hard to drive improved performance across our business.”