Stratus to Launch Two $30M Funds

Brazilian private equity firm Stratus Investimentos Ltda. is set to launch its first two funds – one targeting local, the other international LPs – in the second and third quarters of this year. The two funds, which have not yet been named, will carry $30 million targets.

The three principals of Stratus-Alberto Costa Sousa Camoes, Alvaro Lus Goncalves and Fernando Borges – formed the firm last year after leaving Newbridge Latin America, Pactual Electra Capital Partners and investment bank Banco Bozano Simonsen, respectively. Other members of the team include chief financial officer Fernando Jorge Kalleder and project manager Sean Paul Lieb.

Camoes said it was too early to identify limited partners, but indicated the local fund, which will be launched first, would focus on Brazilian pension funds and high-net-worth individuals.

“In the U.S., a high percentage of pension fund assets are now in private equity and venture capital … pension funds [in Brazil] are wanting to do the same thing,” he said.

For the second, international, fund, Camoes said U.S. pension funds, banks, high-net-worth individuals and multi-lateral companies are all possible limited partners.

Stratus will seek to invest in medium-size Brazilian companies for two reasons, Camoes said. “There are very few opportunities and many players [with larger deals],” he said. “[And in Brazil] there are lots of companies with no other source of capital.”

Stratus will seek to invest in companies in the business, financial and consumer service sectors and in media. Deal sizes will range from $5 million to $15 million.

“In many cases, you can’t invest more money than that without reducing your returns,” Camoes said. You also run the risk of “diluting the interest of the company you’re investing in if you have too big a stake.”

Camoes said his firm believes private equity investors in Brazil have overlooked “the great potential of partnerships in the market.”

The first will seek three forms of partnerships. The first type will be partnerships between investors, which share experiences, human resources and exit strategies. Second, there will be partnerships with entrepreneurs during the business plan development, and finally, partnerships with companies’ management teams, who besides being executives should be aligned with the investors through benefit plans and equity participation based on capital gains.

“We’re trying to go off the beaten path geographically [in Brazil],” he said. “We believe there’s opportunities in the far south [below Sao Paulo and Rio de Janeiro, the industrial heart of the country] and in [the Brazilian state of] Minas Gerais.”

Additionally, Camoes said Stratus would employ caution with regards to Internet investments.

“We prefer not to take that risk early in our careers,” he said. “We might invest in a magazine that also has an Internet site, or in a fulfillment and logistics company.”