Itaú’s asset management firm Kinea has raised more than R$1 billion for a new private equity fund, at a time when questions are being asked about the viability of large foreign PE firms operating in Brazil.

Kinea has announced its new fund will target minority investments in mid-sized firms that are active in consumer-related sectors, such as education, healthcare and food. It plans to buy stakes in up to eight companies and expects to announce its first transaction shortly. Thereafter, it aims to conclude two or three deals a year valued at between R$70 million and R$300 million.

The growth in the local domestic funds threatens the ability of international firms to deploy capital. One senior banker at an international firm says: “I see these firms come in with $1 billion-plus of capital to employ, they set up offices in Faria Lima and they are all brought the same deals.

“The competitive advantage is definitely with the locals, who have contacts throughout the country and who, generally, look to a smaller deal size. I fear for the internationals. It is inevitable that we will see some exits.”

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