AMERICAS NEWS: Fosun bets on ailing Brazil

One of China’s biggest private conglomerates Fosun has established a presence in Latin America with the acquisition of Rio Bravo Investimentos, a Brazilian investment manager.

With the latest platform acquisition, a preferred investment strategy for Fosun’s overseas pursuits, the group has become one of the first Chinese financial companies to set foot on the South American continent.
Expectedly, the timing of the unconventional move – made during a protracted period of political and economic turmoil in Brazil – has elicited both surprise and skepticism among its industry peers. A Chinese fund manager, which called the deal an opportunistic buy, questioned the risk-reward tradeoff of entering an uncertain emerging market.

The timing of entry is indeed opportunistic from a real estate standpoint. Moody’s forecasted a 20 percent drop in property last year and expects the sector to remain under pressure until mid-2017, which could amplify the opportunities of discounted asset buys.

But Fosun’s foray should be analyzed not just from a real estate perspective but as a wider strategic decision. The São Paulo-based Rio Bravo manages 10 billion reais ($3.12 billion; €2.77 billion) of third-party capital across a whole spectrum of asset classes, including private equity, public equity, infrastructure, and real estate. Alex Gong, senior assistant president of Fosun Group and president of Fosun Property Holdings, told PERE the acquisition is in line with Fosun’s ambitions of expanding its capabilities across all asset classes in overseas markets.

Fosun said in early August that it would look to expand Rio Bravo’s business portfolio and products to new operational lines according to opportunities and synergies with other international platforms of Fosun.

Gong also dismissed the short-term risks associated with investing at this juncture in Brazil, as Fosun plans of being a long-term investor in the region.

“The decision to invest in Latin America is more about diversification, especially given the current landscape of the international economy,”
he added.

Fosun is believed to have been hunting for deals in Brazil for over a year. According to industry sources the firm was also in discussions to acquire the Brazilian operations of another real estate investment manager but the deal did not go through because Fosun was keen on acquiring a controlling stake. In both of its previous property platform buys – the Tokyo-based IDERA and the UK-based Resolution Property Partners, Fosun maintains a majority stake.