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Exclusive: Mexico’s FOCIR targets agtech through 50-year fund of funds

Set to commit to its first three GPs, the state-backed institution is also investing FICA 3, the $117m latest vehicle of its agribusiness PE series.

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Set to commit to its first three GPs, the state-backed institution is also investing FICA 3, the $117m latest vehicle of its agribusiness PE series.

In a sign of maturation of Mexico’s private equity sector, FOCIR, the country’s investment fund for the rural sector, is seeking to back agtech-focused firms through an innovative fund of funds.

The institution used to make private equity investments lasting four to seven years, as Mexican investment funds were limited to a duration of 10 years by law. But recent changes to the legislation now allow funds to last up to 50 years, and FOCIR is taking advantage of this by launching an open-ended, longer-term fund of funds.

The organization’s technical committee last month approved its first three investments from the vehicle. The chosen GPs are InnovaCamp Food-Agrobusiness Ventures, Euno Capital and Ercus Abaco, which together aim to raise nearly $40 million. FOCIR is now carrying out due diligence on the funds, according to Ana Paula Mendoza Gunter, who is leading the effort.

FOCIR expects a minimum 8 percent net return from its investments through the fund, with participation in the waterfall of investee GPs through catch-up and carry. “We want to reach more projects to boost Mexico’s agtech ecosystem,” Gunter told Agri Investor. “But we can’t increase our resources because we’re limited by the federal budget. Here we have a product that does not require more human resources.”

LPs in the fund include other government agencies, but also family offices and some institutions. Government resources in any case can’t account for more than 49 percent of the vehicle, as otherwise it would be classed “a government-owned company”, Gunter said.

Double-digit returns

This fund of funds comes in addition to FOCIR’s suite of more traditional private-equity vehicles, in which it also acts as an LP. In 2006, the state-backed institution launched the first of the series, and fully exited FICA 1 last year.

While each vehicle has a different investment thesis, all of them are matching funds, meaning FOCIR supports fundraising by providing 35 percent of the sum committed by other LPs. To date, the funds have deployed $217 million in aggregate, out of a total investment target of $382 million. The latest of the series, FICA 3, has already invested $32 million, out of $117 million of initial dry powder.

Investors in the fund can be other government entities and local LPs, but regularly they also include investee companies. These can participate by pledging assets to the fund. “We don’t always ask for liquid money, we take into account the assets they have,” Gunter said.

FOCIR, which has now invested in 30 projects, aims for an overall net return of 15 percent across funds.