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Darby Financial Services Strictly Private
Darby Financial Services Strictly Private
Darby Financial Services Strictly Private
Darby Financial Services Strictly Private
Darby Financial Services Strictly Private
Darby Financial Services Strictly Private
Darby Financial Services Strictly Private
Darby Financial Services Strictly Private
Darby Financial Services Strictly Private
Darby Financial Services Strictly Private
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Darby Financial Services Strictly Private

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  • 1. The Future of Domestic Capital Markets in Developing Countries Conference Panel: The Role of Private Equity in the Development of Domestic Capital Markets Alejandro Schwedhelm
  • 2. Darby Overseas Investments, Ltd A l eading investment advisor in emerging markets A leading investment firm that invests its own and client capital in emerging markets. Currently, the firm provides investment management/advisory services with respect to funds amounting to over $1 billion across five investment fields. Darby was established in 1994 by The Honorable Nicholas F. Brady, former U.S. Treasury Secretary and Chairman of Dillon, Read & Co. Inc. Mr. Brady serves as Darby’s Chairman. The firm’s CEO is Richard H. Frank, former World Bank Managing Director and CFO of the International Finance Corporation. FINANCIAL SERVICES <ul><li>Darby Financial Services </li></ul><ul><ul><li>Targeting bank and non-bank opportunities in Latin America, US Hispanic, and the US - Mexico border economy </li></ul></ul><ul><ul><li>Darby Regional Banking Fund, a specialized financial sector fund for Central America </li></ul></ul><ul><ul><li>Portfolio oversight and exit strategy for Darby’s financial sector investments </li></ul></ul><ul><ul><li>Mandate to create new funds for broader emerging market financial services investment </li></ul></ul>FIXED INCOME <ul><li>Darby Emerging High Yield Fund </li></ul><ul><ul><li>$12 million </li></ul></ul><ul><li>Darby Emerging Markets Income Fund </li></ul><ul><ul><li>$10 million </li></ul></ul><ul><li>Sub-Advisory Relationships </li></ul><ul><ul><li>$500 million CBO with Mass Mutual </li></ul></ul><ul><ul><li>Moneda Asset Management (Chile) </li></ul></ul><ul><ul><li>Etra Emerging Markets Income Fund (Italy) </li></ul></ul>PRIVATE EQUITY <ul><li>Darby Emerging Markets Fund, L.P. </li></ul><ul><ul><li>$150 million invested in 11 companies in Mexico, Brazil, Peru, Chile and Colombia </li></ul></ul><ul><li>Darby-BBVA Latin American Private Equity Fund, L.P. </li></ul><ul><ul><li>$250 million target </li></ul></ul><ul><ul><li>$100 million raised </li></ul></ul><ul><ul><li>Investment and further fund raising under way </li></ul></ul><ul><ul><li>Sectors : Consumer Industries, Retailing & Distribution, Financial Services, Oil and Gas, Telecommunications </li></ul></ul>TECHNOLOGY VENTURES <ul><li>Darby Technology Ventures Group, LLC </li></ul><ul><ul><li>Early stage technology investments in Latin America </li></ul></ul><ul><ul><li>2 portfolio companies in Brazil and Argentina </li></ul></ul><ul><ul><li>Transfer and adapt advisory services </li></ul></ul><ul><ul><li>Technology Centers </li></ul></ul><ul><ul><li>Sectors : Infrastructure Services; Enterprise Software and Networks Communications </li></ul></ul>MEZZANINE FINANCE <ul><li>Darby Latin American Mezzanine Fund, L.P. </li></ul><ul><ul><li>First dedicated Mezzanine Finance fund for Latin America - $195 million </li></ul></ul><ul><ul><li>8 investments - $114 million (telecom, port, toll roads, gas pipeline, water treatment, waste management) in Mexico, Brazil, Colombia, Bolivia, Argentina </li></ul></ul><ul><li>Asian Infrastructure Mezzanine Capital Fund </li></ul><ul><ul><li>First dedicated Mezzanine Fund for Asia - $246 million </li></ul></ul><ul><ul><li>9 investments - $187 million (telecom, transportation, power) in China, Korea, India, Philippines, Indonesia </li></ul></ul><ul><ul><li>Hong Kong-based team </li></ul></ul>
  • 3. From the Panel’s premises <ul><li>Equity markets can create virtuous cycles </li></ul><ul><li>Private Equity can fill the need for equity finance </li></ul><ul><li>Private equity can help stimulate and professionalize domestic investment </li></ul><ul><li>Expectations have not been met </li></ul><ul><li>Critical success factors </li></ul><ul><li>Development of Private Equity Industry </li></ul>
  • 4. Equity markets can create virtuous cycles <ul><li>No question. </li></ul><ul><li>Fundamental Obstacle: </li></ul><ul><li>Entrepreneurs see firms as their “baby”, not as the product of their work. </li></ul><ul><li>Two responses: </li></ul><ul><ul><li>Owners seek long term success </li></ul></ul><ul><ul><li>Transparency transforms “control” into “leadership” </li></ul></ul>
  • 5. Private Equity can fill the need for equity finance <ul><li>Not under today’s international and local market conditions. </li></ul><ul><ul><li>Insuficient volume </li></ul></ul><ul><ul><li>High earnings expectations </li></ul></ul>
  • 6. Private equity can help stimulate and professionalize domestic investment <ul><li>Definitely </li></ul><ul><li>Some characteristics of Private Equity: </li></ul><ul><ul><li>High perceived risk </li></ul></ul><ul><ul><li>High expected return </li></ul></ul><ul><ul><li>High administrative cost </li></ul></ul><ul><ul><li>High concentration </li></ul></ul><ul><ul><li>High participation </li></ul></ul><ul><ul><li>Professional oversight </li></ul></ul><ul><ul><li>“ Own” regulator </li></ul></ul><ul><ul><li>Cross-pollinization </li></ul></ul>
  • 7. Expectations have not been met <ul><li>Volume? Results? </li></ul><ul><li>Re-visit the nature of Private Equity: </li></ul>Public Markets Venture Capital / Friends & Family Private Equity
  • 8. Critical success factors <ul><li>Character & Ethics </li></ul><ul><li>Rate of return </li></ul><ul><ul><li>Entry valuation </li></ul></ul><ul><ul><li>Sources of value </li></ul></ul><ul><ul><ul><li>Organic growth </li></ul></ul></ul><ul><ul><ul><li>Strategic growth </li></ul></ul></ul><ul><ul><ul><li>Strategic acquisition / sale </li></ul></ul></ul><ul><ul><li>Risk – reward equilibrium </li></ul></ul><ul><li>Management </li></ul><ul><li>Exit strategy </li></ul><ul><ul><ul><li>Formula based put </li></ul></ul></ul><ul><ul><ul><li>Market sale (IPO or gradual) </li></ul></ul></ul><ul><ul><ul><li>Trade sale </li></ul></ul></ul>
  • 9. Development of Private Equity Industry <ul><li>Avoiding over-regulation </li></ul><ul><ul><li>SINCAs in Mexico </li></ul></ul><ul><li>The market dilemma </li></ul><ul><ul><li>Optimized for quality or volume / liquidity </li></ul></ul><ul><ul><li>Private equity prefers the latter </li></ul></ul><ul><ul><ul><li>Implication: Grown-up investor does homework </li></ul></ul></ul><ul><li>Success stories </li></ul><ul><ul><li>For Private Equity investors </li></ul></ul><ul><ul><li>For investee companies’ shareholders </li></ul></ul>
  • 10.  

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