Lightrock takes a regional impact approach to tap into emerging markets LP base

Impact firm Lightrock, an offshoot of Liechtenstein’s LGT Group, is pursuing a regional investment strategy to attract institutional investors with more local impact appetites. The firm today announced a final close on a Latin America-focused growth equity fund at $300 million – over half of which was raised from LGT, Brazilian Development Bank and two Brazilian asset management firms, XP Inc and Banco Bradesco.

Over the past year, “we have focused more on regional fundraising,” chief executive Pål Erik Sjåtil told New Private Markets. “Our intention is to do more regional and sector-focused funds.”

Lightrock took a regional approach for the Latin American fund “because we want to be able to attract LPs in Latin America. A lot of LPs prefer a regional focus,” Sjåtil added. The fund will encompass social and environmental impact themes including healthcare, education financial services and transport, and has made six investments so far.

The firm is targeting 25 to 30 percent IRR for this fund, a source familiar with the vehicle told New Private Markets. Lightrock declined to comment.

Overall, the firm has a global investment focus, including emerging and developed markets, and has offices in Switzerland, India, Brazil and Kenya. Last year, Lightrock closed its debut fund, which had a global strategy, at $900 million. This fund assumed ownership of 26 existing assets from LGT’s formerly separate impact investing units. “The first global growth fund was global because it made sense for kicking off the platform and bringing together all our stakes in all those companies,” said Sjåtil. But he added: “A global fund can become a bit too generic for certain LPs. In future, we will look at regional and thematic funds.”

Lightrock and LGT have invested $400 million in Latin America since 2017. In this time, “we’ve been drawing the attention of some of the local institutional investors”, Marcos Wilson Pereira, the firm’s head of Latin America, told New Private Markets. “For most of those institutional investors, investing in a fund that is only focused on that region would make sense for those LPs. That helped us shape this strategy. Most LPs were looking for a combination of financial returns and impact. Some of them even have a specific orientation towards impact.”

Lightrock sees Latin America as an untapped market of institutional investors. “There aren’t many growth equity firms in the region,” said Pereira. “There are typically more VC firms, hedge funds, crossover funds, global funds – which is not necessarily what our LPs are looking for.

“There is a huge market of pension funds to be developed in Brazil,” Pereira added. “Most Brazilian pension funds don’t have access to private equity funds or are not allowed to invest in private equity funds, but this has been changing over the last few years. Most likely, when we come back to the market in two or three years, that will be a huge opportunity for us. It’s just a matter of time.”