Member: Australis Partners
Executive: Enrique Bascur, Managing Partner
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LAVCA spoke with Enrique Bascur, Managing Partner of Australis Partners, about the experience fundraising during a challenging period in Latin America and how the team’s background at CVCI helped create the fund’s strategy. Bascur also discusses his views of the political environment in Chile and his expectations for the new government in relation to private investments.

LAVCA: What led you to form Australis Partners and what is your background?

Enrique Bascur: We were a team of senior private equity professionals with over fifteen years of successful experience working together in Latin America. Citi’s CVCI, where we had developed our careers until 2013, was no longer available as a platform to manage PE funds and invest in the region so we decided to form Australis Partners in 2014.

I had a career in the financial sector in Latin America which started with the financial regulators in Chile, and continued with Citi and Bankers Trust, to finally focus on PE in 1998. By 2013, I had headed the CVCI Latin America team for eight years and was highly motivated to keep one of the most experienced teams in the region working together.

LAVCA: What opportunity do you see in Latin America in terms of sectors, markets, and strategies that helped you define the firm’s investment thesis? Do you see Australis Partners concentrating on a few specific sectors or will the investment focus expand opportunistically?

Enrique Bascur: While we see various strategies in Latin America that can be successful, we focused on a strategy that is consistent with the underlying trends in the region, in a subset of countries where the team is highly experienced and can best execute this strategy. Australis operates principally in Mexico, Colombia, Chile and Peru, focusing on the rapid growth of the middle class, the consequential expansion of consumption, and the close relationship between energy and infrastructure growth and overall development. We are likely to expand into sectors that are consistent with those underlying trends. Our targets are typically companies with strong growth, and we target buyouts or minorities with significant rights, where we can effectively influence or determine the company’s path, as well as control exit.

Australis operates principally in Mexico, Colombia, Chile and Peru, focusing on the rapid growth of the middle class, the consequential expansion of consumption, and the close relationship between energy and infrastructure growth and overall development.

LAVCA: You have nearly 20 years of experience making investments in Latin America. How has the private equity opportunity in the region evolved since that time?

Enrique Bascur: 20 years ago, there was little knowledge or understanding of the role of private equity, nor of the terms on which private equity operates. We started out as balance sheet investors for a bank with strong regulatory constraints on the size and terms of our investments, which forced us to develop our own process and terms but with access to the global experience of a large institution such as Citi. We acquired significant experience in making minority investments and successfully exiting those investments during that time. Simultaneously we gained operating experience and developed an informal network of operating partners that allowed us to make successful buyouts as the regulatory constraints shifted and eventually we operated under a more traditional fund structure.

LAVCA: You closed a US$379m fund in 2017 during a difficult period for fundraising in Latin America. What can you say about the fundraising process? What types of investors are interested in Latin America today?

Enrique Bascur: The fundraising process was very challenging for the team as we had little or no experience on that side of the business at CVCI and no connections with the institutional market. However, we believed that forming a strong base of institutional investors from the global market would be more consistent with our track record as investment professionals than limiting ourselves to Latin American institutions and family offices. 2016 was a difficult period for fundraising for Latin America, as many of the existing investors were under water due to the recent devaluations and slower economic growth, especially in Brazil. Our investors, essentially North American and European institutions, fall largely into two categories:  those with little or no exposure to the region who saw this as a good time to enter a market they had been considering and those already invested but with a deep knowledge and understanding of the trends and cycles of the region who wanted to continue to invest through all vintages. 

LAVCA: What do you think is the “right size” for a fund based on the opportunity in Latin America? Why?

Enrique Bascur: I believe there is space for funds of different sizes. The appropriate size for our fund was determined on the basis of the number of senior investment professionals on our team, under the premise of managing two to three portfolio companies per senior, and a bite size for the fund in the range of 50 to 70 million USD. We believe that is ideal for capturing a large number of transactions of substantial companies that have enough size to be able to attract and retain strong management teams, and which will have multiple avenues for exit as they grow to the next level.

LAVCA: Please talk about the investment that you made in environmental services company Disal. Disal has a focus on sanitization services and waste management in the industrial sector. How is it a pan-regional play?

Enrique Bascur: Our investment in Disal is consistent with our strategy. Environmental services grow exponentially with increased affluence and certain industries are more easily able to afford these services in the current environment. We are also seeing environmental regulations tightening with stricter enforcements, indicating a solid growth trajectory for a company like Disal. This is happening at an accelerated rate in the region and Disal is a very significant player in this space, with a presence in Chile and Peru, as well as a small operation in Paraguay. The company is already a pan-regional play and will continue to evaluate further geographic expansion, however it faces multiple avenues for growth beyond geographical expansion. Disal has a strong brand name and we have been able to add a motivated management team to complement its marketshare.

LAVCA: What can you share about any other deals that are in the pipeline?

Enrique Bascur: We currently have a very strong pipeline, with opportunities in the “hard” sectors the team has successfully managed in the past, but also in more novel service-based sectors, such as healthcare and the financial sector. These are areas we now see as actionable opportunities with good returns.

LAVCA: As a Chilean and an active investor in that market for many years, can you share an opinion on the current political environment in the country? What are your expectations for the new President?

Enrique Bascur: In my view Chile has shown great strength in its democratic institutions by holding a flawless election process and a very civilized form of transitioning between governments of different political affiliation. This makes me optimistic about the governance of the country and the ability to work together, which is necessary as the new president’s coalition does not have majority in congress.

The new government has a detailed program which I expect they will try to meet, addressing some controversial issues such as pension reform, simplification of the tax code, modernization of the government structure, and improvement in the quality of education. Personally, I believe that if those issues are properly addressed the country will benefit from increased business confidence at the same time that social cohesion improves.

The new government has a detailed program which I expect they will try to meet, addressing some controversial issues such as pension reform, simplification of the tax code, modernization of the government structure, and improvement in the quality of education. Personally, I believe that if those issues are properly addressed the country will benefit from increased business confidence at the same time that social cohesion improves.

LAVCA:  What role does ESG play in your investment activity? Was this an important topic with LPs when raising your fund?  

Enrique Bascur: ESG is a strong part of our business DNA, as at CVCI it was always a priority to operate under high ESG standards. We found an increasing interest in the issues among many of the LPs while raising funds, especially pension funds, DFIs, and foundations. We adopted the IFC policies and procedures which provides a good framework to address these issues, and it has worked well for us.

LAVCA: Why did you join LAVCA?

Enrique Bascur: I have been involved with LAVCA since its early days as CVCI was one of its founding members. Because of that, I had the opportunity to serve on the board for several years.  Knowing the association well, I highly appreciate the role it plays in providing visibility to the industry in the region through its newsletters, publications and events, helping establish a common ground and language for the managers in the region. LAVCA provides an excellent forum for discussion and networking and in addition has done an outstanding job in establishing a quality set of statistical information about the industry in the region. Under Cate Ambrose’s leadership it has grown to be an association that is highly recognized by managers, LPs and all those interested in understanding private equity and venture capital in Latin America.