Need to Meet: Robert Linton, Coordinator, ABVCAP

In Brazil, foreigners are often referred to as ‘gringos,’ but in the offices and cafes of São Paulo and Rio de Janeiro, the term is most often one of genuine affection, unlike in, say, Caracas or Mexico City, said Robert Linton, a well-connected Brazilian-British-American who helps raise the profiles of medium-sized Brazilian private equity firms among global institutional investors.

Linton’s 18 years in Brazil have given him a deep knowledge of the nation’s language and culture and have made him an important on-the-ground resource for institutional investors. As coordinator of investor relations for the 146 members of ABVCAP, Brazil’s private equity and venture capital association, Linton said that even though the country’s remarkable growth story is well known, Brazil still has to deal with the “stigma of exoticism.”

Unlike China, he said, Brazil is not yet a strategic allocation for institutional investors. Also, pension funds and endowments still have painful memories of their Brazilian investments crashing down in the 1990s.

In many ways, the recent financial crisis was a litmus test of the economy’s strength, and by this measure, Brazil has performed well. The country’s growth rate is now at its pre-crisis levels of 6.7 percent, and the private equity industry is also looking to return to pre-recession levels. “It’s been a sea change,” said Linton. “Interest in private equity is far greater than it was three to four years ago.” He predicted three or four fund closings in the first half of 2011.

Obviously, not all is roses. Linton said the high cost of leverage usually means buyout firms do without. He also pointed out Brazil’s “productivity gap,” but said that the nation’s abundance of inefficient enterprises represents an opportunity for private equity firms that can come in and improve operations and margins.

Certainly, global players like the Carlyle Group and Kohlberg Kravis Roberts & Co. have been investing in Brazil for years, but Linton said that large domestic firms such as Patria, Gavea and Southern Cross have had a lot of success raising funds globally. He reckoned that foreign investors are now responsible for about half the new funds flowing to Brazil’s buyout firms. Which is good for the medium-sized private equity firms that Linton seeks to match up with global limited partners: firms such as DLJ, Rio Bravo, DGF, AG Angra and TMG Capital that are looking to tap international institutions to help raise funds ranging from $150 million to $600 million.