Private equity funds, or investment firms that acquire stakes in companies, are holding portfolio companies for longer than ever, a direct reflection of the difficulty in selling assets at a time when Brazil’s IPO market remains effectively shut. Last year, funds held companies in their portfolios for an average of 5.6 years, double the period seen 15 years ago, according to a study conducted by Spectra at the request of Valor.
According to the survey, the average holding period has increased every year since 2011. In 2024, the average was 5.4 years; in 2023, 5.2 years; and in 2022, 4.8 years.
“This longer holding period is not surprising given the liquidity challenges we are facing. The IPO market has been closed for several years and M&A activity is still weak,” said Caio Longhini, partner at Spectra. According to him, an effective decline in interest rates should eventually change the picture, opening room for funds to accelerate divestments.
He added that, as a result, a secondary private equity market is beginning to develop in Brazil. Currently, about 40% of Spectra’s funds are invested in this strategy. These vehicles may either acquire stakes from private equity investors or serve as continuation funds, structures that allow managers to extend their investment horizon and hold assets for longer.
Priscila Rodrigues, president of Abvcap, said the greater difficulty in exiting investments directly affects fundraising efforts by private equity firms. She stressed, however, that the trend is not unique to Brazil. “Exits are slowing in international markets as well,” she said.
Rodrigues noted that private equity investment cycles in Brazil have historically been longer than abroad because the strategy here is focused on growing companies organically, which naturally takes more time. In the United States, by contrast, the dominant model relies on leveraged buyouts financed through debt.
She added that Brazil’s frozen IPO market hurts the industry even if public listings are not the main exit route for local funds. According to her, weak equity markets reduce capital available to companies pursuing acquisitions, affecting the broader ecosystem.
Carlos Parizotto, head of investment banking at Galapagos Capital, said the current environment will have lasting consequences, whether through the expansion of the secondary market and continuation funds or through a shakeout among asset managers, as some firms will struggle to continue raising capital. “In the United States, we are already seeing concentration in fundraising,” he said.
Giuliano Colombo, a partner at the Pinheiro Neto law firm, said the difficulty in divestments stems from two distinct factors. One group of managers is holding investments longer because market conditions make it harder to sell assets at desired valuations. Another group, however, is delaying exits because portfolio companies themselves are struggling, as high interest rates erode cash generation.
In the most severe cases, he said, one solution has been to transfer companies to firms specializing in turnaround and restructuring operations.