With Brazil Fund In Hand, Darby Eyes The Globe

Darby Overseas Investments expects to close a mezzanine fund dedicated to infrastructure in Brazil by the end of June at approximately R$400 million (U.S. $249 million), a source familiar with the fundraising told Buyouts. The vehicle is Darby Overseas Investment’s first vehicle dedicated to a specific country, although it won’t be the last.

The global firm, which specializes in emerging markets private equity investments, plans on raising local currency funds over time dedicated to infrastructure deals in Korea, India, China and Mexico, our source said. The firm also plans on raising a global infrastructure fund in American dollars that targets emerging markets, including in the countries with dedicated funds, our source said.

The idea is to have local funds denominated in local currencies with money from local investors, coupled with a larger regional fund to accommodate investors from outside these countries, our source said. “So [the firm] will overlay the country-based funds with a Darby Infrastructure Fund, which will invest in the various emerging markets where [the firm has] expertise,” our source said.

Darby Overseas Investments, the private equity arm of mutual funds manager Franklin Templeton Investments, is still plotting its global strategy, so it remains unclear when the firm will start raising the new funds. The funds may be mezzanine vehicles or combine mezzanine and equity.

Darby Overseas Investments raised Darby Brazil Mezzanine Fund LP, its first fund dedicated to infrastructure, in response to demand from local investors. The fund’s managers plan to invest directly in and manage Brazilian infrastructure projects and companies.

The firm, founded in 1994, invests in a variety of sectors, including financial services, manufacturing, media, and consumer goods and services. In infrastructure, its areas of interest include transportation, energy, telecommunications, waste management and water treatment. Darby Overseas Investments employs 50 professionals in 12 offices worldwide.

The Brazil fund is headed by Fernando Gentil, a former executive at Swiss Re. Diane Smith, a former managing director with Electra Investment Trust, joined Gentil’s team in January.