Pension funds and the secondary private equity market in Brazil: a study of Petros and Previ transactions

Purpose: This study analyzes the sale of shares in the secondary market of a portfolio of Private Equity Funds (FIPs) held by two Closed-Entity Pension Funds (EFPC) or pension funds, Petros and Previ, in 2019 and 2021, respectively, to highlight the main challenges, structural limitations, and opportunities of the secondary private equity market in Brazil. Methodology: This research employs a descriptive approach through a documentary analysis. The study focuses on the transactions of the Brazilian pension funds Petros and Previ between 2019 and 2021. We collected data from several sources, including reports from the Brazilian Securities and Exchange Commission (CVM), EFPC's financial statements, and official institutional publications. Results: Based on public data and the perspective of current regulation applicable to FIPs and pension funds, the results identified a discount on the price compared to the mark-to-market value of the assets as reported in the funds' financial statements and the EFPCs' annual reports as of the negotiation date. Contributions of the Study: The observed discount reflects a developing market, where the primary challenges center on consolidating specialized players and favorable market conditions. However, these EFPC transactions represent a milestone for Brazil's private equity and venture capital sector. They can serve as a reference for other pension funds to explore the secondary market in search of liquidity for their FIP holdings, thereby encouraging new investors and assisting fund managers.