Brazil's Gavea grows after Harvard stake sale

Following Harvard’s purchase of a 12.5 percent stake in the alternative asset manager, Rio-based Gavea Investimentos is nearing $6 billion in assets under management.

Following a significant equity investment by the Harvard endowment, Gavea Investimentos, a Brazilian multi-strategy investment firm with a private equity programme, is nearing $6 billion (€3.9 billion) in total assets under management, according to a partner in the firm.

Harvard Management Co., which manages the largest university endowment in the world at $33 billion in assets, purchased a 12.5 percent stake in Gavea last December. Although the total dollar amount of the investment was not disclosed, alternative asset management companies similar to Gavea have recently been priced in the range of between 8 percent and 15 percent of assets under management.

Halcyon Asset Management, a New-York based hedge fund with roughly $11.5 billion in assets, was purchased last week at 8.5 percent of assets under management.

Harvard was a leading LP in several Gavea funds, according to the partner. Rio de Janeiro-based Gavea, established in 2003 by former Brazilian central bank governor Arminio Fraga, is a multi-strategy investment firm with both liquid and illiquid investment strategies.

Harvard Management did not respond to requests for comment.

Gavea’s private equity unit pursues deals in the $10 million to $25 million range. How the newly expanded capital base will affect Gavea’s private equity unit is unclear, although the firm has stated that its core investment strategies will remain the same.

Gavea has recently purchased stakes in Fazenda Ipanema, Brazils’ biggest coffee farm; Corporacion Interamericana de Entretenimento, a live entertainment promoter; and Magnesita, a blast furnace equipment manufacturer.

Brazil has recently evolved into a hotbed of both local and international private equity investments, owing primarily to the country’s prodigious growth rates and relatively stable political climate. Although US private equity activity in the country has declined after 1998, local alternative asset firms have grown in number, and a growing number of global private equity firms are eyeing the country for expansion.

According to a 2006 survey by a Brazilian private equity research center, there are more than 71 private equity and venture capital firms with offices in Brazil, making the country the largest private equity home in the region.