Cesar Collier, Managing Director at Siguler Guff, a multi-strategy private equity investment firm with more than $10bn under management, discussed how the firm targets small to mid-market buyouts. Collier also shared his views on the challenges and opportunities in Latin America in context of Siguler Guff’s other markets.
LAVCA: Please give some background on your different funds. What are your assets under management?
Collier: Siguler Guff & Company (“Siguler Guff” or the “Firm”) is a multi-strategy private equity investment firm which, together with its affiliates, has over $10.0 billion of assets under management. Siguler Guff focuses on identifying market inefficiencies and areas of capital starvation and creating efficient solutions to capture them. For its multi-manager strategies, Siguler Guff sponsors and manages funds targeting specific areas of compelling opportunity, including BRICs / Emerging Markets, distressed securities, small buyouts, distressed real estate and healthcare. Siguler Guff also provides discretionary private equity advisory services through Siguler Guff Advisers, a federally registered investment advisor. Siguler Guff’s affiliate, Russia Partners, has over $1 billion of assets under management and manages several direct private equity funds that make direct equity and equity-related investments in companies operating in the Russian Federation and other countries of the former Soviet Union.
LAVCA: Can you give us any information about your performance in recent years?
Collier: Since Siguler Guff was founded in 1991, the Firm has focused on creating innovative solutions to capture market inefficiencies. Siguler Guff has a long-standing track record of managing assets in closed-end multi-manager funds, direct investment funds and separate accounts in its core strategies.
LAVCA: Roughly what percentage of your portfolio do you generally allocate to emerging markets private equity? To Latin America?
Collier: Approximately 30% of Siguler Guff’s total capital commitments are allocated to the Emerging Markets. The Siguler Guff BRIC Opportunities Funds are diversified portfolios of “best in class” private equity funds investing in the rapidly growing economies of Brazil, Russia, India and China (the BRIC economies) and select other Emerging Markets. The Funds expect to take advantage of the many opportunities in fast-growing consumer sectors that result from the expanding middle class and growth in per capita GDP of these emerging economies.
LAVCA: Could you give some background on your BRIC Opportunities Fund of Funds? What is the strategy and how does it differ from your other EM-focused funds?
Collier: Siguler Guff’s Emerging Markets strategy is to identify the compelling value propositions across the Emerging Markets and partner with top-tier local managers in order to access the best deals. The Siguler Guff BRIC Opportunities Fund, LP is a 2005 vintage US$610 million fund, and was the first multi-manager private equity fund to focus on the emerging economies of Brazil, Russia, India and China. Its successor fund, the Siguler Guff BRIC Opportunities Fund II, LP is a 2008 vintage US$893 million fund. Siguler Guff’s other Emerging Markets-focused funds include Russian direct investment private equity funds managed by Russia Partners and tailored separate accounts that the Firm creates based on clients’ diversification goals.
LAVCA: Could you also give some background on your Small Buyout Opportunities Fund? What types of opportunities have you seen in the middle-market space in Latin America, if any?
Collier: Siguler Guff’s Small Buyout Opportunities Fund was created to build a well-diversified portfolio of “best in class” funds investing in the securities of small and lower middle market companies. The Firm believes that the small buyout market offers an area of great inefficiency and has a variety of appealing characteristics, including substantial deal flow, less competitive transactions, lower purchase multiples, and significant value creation potential.
Siguler Guff believes there are attractive investment opportunities in middle market Latin American companies in high-growth sectors such as consumer, healthcare and education.
LAVCA: What geographies or countries are of particular interest to you right now? What about in Latin America specifically? What is your take on the current state of private equity investment in Latin America?
Collier: Siguler Guff’s São Paulo, Brazil-based team covers investments that the Firm makes in Latin America. Brazil, Colombia, Mexico, Peru and Chile are currently countries of interest to the Firm. Siguler Guff believes that Latin America offers investment opportunities with low entry multiples and limited competition. In 2011, the Emerging Markets Private Equity Association (EMPEA) showed that PE investments as percentage of GDP accounted for only 0.06% in Latin America as a whole and 0.10% in Brazil when compared to a 0.98% and 0.75% in the U.S. and U.K., respectively. Siguler Guff believes that this data reveals the growth potential of private equity investing in Latin America.
LAVCA: What would be a typical size of a commitment that you make to a fund?
Collier: The Siguler Guff BRIC Opportunities Funds invest approximately 70% of their committed capital in funds and up to 30% of committed capital in direct investments, typically in the form of co-investments. The Funds’ typical commitment size is approximately US$30 million.
LAVCA: What are the key characteristics of the best emerging markets fund managers?
Collier: Siguler Guff believes the best fund managers have credible investment strategies, proven track records, a visible pipeline of quality transactions, and are like-minded investors. The Firm also looks for managers who are dedicated to investing in the relevant sector, have a proven investment strategy, a track record of successful exits, proven origination/sourcing capabilities and a team that has worked together for a significant amount of time.
LAVCA: Do you ever invest in first-time funds?
Collier: Although Siguler Guff does not typically invest in first-time funds, the Firm believes that its tenure and expertise in this space, coupled with its thorough due diligence procedures, enable it to make informed investment decisions in established, first-time and spin-out funds. Siguler Guff may consider investing in a first-time fund if the Firm already has a relationship with the fund manager and the manager meets the Firm’s due diligence requirements.
LAVCA: What changes do you need to see in Latin America before you start allocating a greater percentage of your funds there?
Collier: Siguler Guff believes that some private equity fund managers’ apprehension to invest in Latin America is a result of government intervention in economies and in companies, especially in countries such as Venezuela and Argentina. The Firm believes that less government intervention in Latin American would lead to increased investor confidence and would promote private equity investing in the region.
LAVCA: What data do you use to benchmark returns and performance in Latin America?
Collier: Siguler Guff considers the Cambridge Associates Global Emerging Markets Private Equity and Venture Capital Index, the MSCI Emerging Markets Index, the Bovespa Index and the MSCI Frontier Markets Index to benchmark returns and performance in Latin America. However, the Firm believes that while a number of benchmarks are useful, all are imperfect.