According to information obtained by Buyouts, South American buyout shop The Exxel Group has reduced the management fee on its sixth fund. The move appears to be a response to an economic meltdown in Argentina that has dramatically lowered the amount of non-distressed investment opportunities throughout the region.When the $441 million fund closed in August of 2000, Exxel Group seemed poised to maintain what previously had been a frenetic investment pace. The Buenos Aires-based firm (whose fund is officially domiciled in the Cayman Islands) committed to three buyout deals by the end of 2000, but was soon derailed by a steady drumbeat of inflation, market contraction, foreign currency restrictions and political upheaval.
In 2002, industrial production had dropped approximately 13% compared to 2001, unemployment was at 22% and the government had raised its inflation projections from a budgeted 15% to a whopping 80%.
The Exxel Group has not made a single new investment since the end of 2000, but has continued pumping follow-on monies into portfolio companies like Argentinean contract-caterer Grupo Integralco S.A. To date the firm has invested approximately $165 million, all of which will maintain its 2% management fees.
The management fees on the as-yet-uncalled commitments will be reduced. Specifically, the next $200 million of uncalled capital will be charged a 1% management fee, while the roughly $70 million of remaining LP commitments will have no management fee at all.
Investors in the Exxel VI fund include Partners Group, the Colorado Public Employees Retirement Association and the Oregon State Treasury. Investors on the fully invested Fund V include such institutions as CommonFund, The Ford Foundation, HarbourVest Partners and MIT.
Attempts to speak with investors at The Exxel Group were unsuccessful, although a representative did confirm that 11-year Exxel veteran Jorge Romero recently left the firm. According to the firm’s Web site, Exxel Group has invested approximately $4.8 billion since being founded in 1991.