Data center platform on private equity funds levels reliability on investment decision
Private equity funds invest in companies that are not listed on stock exchanges. Closely held firms don't make their own accounting information available, therefore they are not considered by the stock market's quotation tools.
Thus fund managers are the main source of information for investors who use private equity as a means to expand their incomes. Fund managers seek to provide reliability by searching many databases for information on more than 1,000 closely held firms, including sources such as the Federal Revenue (RFB), the Administrative Economic Defense Council, and the Securities & Exchange Commission, among others.
Private Equity Bay, a company founded in 2013 in São Paulo, Brazil, was set up specifically to fill this information gap which characterizes the Brazilian private equity industry, one that is expanding in recent years – the sector includes more than 250 managers of 550 funds in operation and has grown an average of 23% per year since 2007, with more than R$100 billion of held corporate investments as of 2017.
"I realized that this market, which also includes venture capital and real estate, among other segments, required an online platform that aggregates and tracks information on funds, asset managers and companies from the participant's viewpoint," says Leonardo de Lima Ribeiro, the firm's founder and CEO, a business administration bachelor from the University of São Paulo (USP) who specialized in corporate finance at Toulouse Business School in France.
Also called Pebay, the firm was set with support from the PIPE/PAPPE Grant Program, the result of an agreement between the São Paulo Research Foundation – FAPESP and the Brazilian Innovation Agency (FINEP) to help firms bring innovative initiatives to market.
The platform developed by Pebay offers financial performance metrics and analysis regarding funds and deals in Brazil, enabling subscribers to use this information to help make important investment decisions.
For example, the system provides information on cash flow, risk and return rates, management, and investors' moves, all based on audited reports, among other kinds of decision-support data. In the case of fund managers, the platform even gleans information from LinkedIn.
"I found that many investors and managers operated in this market without proper information and decided to create a platform to offer this intelligence to the market. Pebay was born from the experience – and risk – of investing without a reliable independent source of information on funds and managers," Ribeiro recalls.
A current researcher at Getúlio Vargas Foundation's Private Equity Research Center (CEPE-FGV), Ribeiro was responsible for designing and managing Brazil's first private equity/venture capital fund of funds. During this undertaking (previous to Pebay) Ribeiro evaluated more than 40 institutions per year, which meant he had to be creative in order to discover ways and means of obtaining the information needed to assess a manager or fund independently.
"In addition to the cutting-edge technology we use, all the information we provide is curated, treated and analyzed artisanally by specialists, since our clients make high-value, high-impact decisions. New information is added to the platform every single day," Ribeiro says.
He adds that the platform is also "ready" to comply with the Brazilian Securities & Exchange Commission – CVM and its Instructions 578 and 579, which as of 2017 require investment entities, including private equity funds, to book equity holdings at fair value so as to assure full comparability between investments.
"The PIPE/PAPPE Grant has enabled us to assemble this jigsaw puzzle," Ribeiro says. This month the platform was officially launched and is already being presented to fund managers, investors, and banks. "It's been very well received," he stresses.
About São Paulo Research Foundation (FAPESP)
The São Paulo Research Foundation (FAPESP) is a public institution with the mission of supporting scientific research in all fields of knowledge by awarding scholarships, fellowships, and grants to investigators linked with higher education and research institutions in the State of São Paulo, Brazil. FAPESP is aware that the very best research can only be done by working with the best researchers internationally. Therefore, it has established partnerships with funding agencies, higher education, private companies, and research organizations in other countries known for the quality of their research and has been encouraging scientists funded by its grants to further develop their international collaboration. For more information: http://www.fapesp.br/en.
Joao Carlos da Silva