Fitch Ratings has today affirmed the 'M1(bra)' National Asset
Manager Rating for BTG Pactual Asset Management S.A. Distribuidora
de Titulos e Valores Mobiliarios (BTG Pactual Asset). The 'M1(bra)'
category is assigned to asset managers operations that show the
lowest vulnerability to operating and investment management
failures.
The National Asset Manager Rating of BTG Pactual Asset reflects
the benefits of being part of the BTG Pactual group (Foreign and
Local Currency Long-Term IDRs 'BBB-'; Outlook Stable by Fitch), one
of the largest Brazilian investment banks with a strong reputation
in its business segments and good profitability ratios. The group
has a well defined structure and investment philosophy supported by
experienced and qualified management, as well as robust risk
controls and compliance.
The BTG Pactual Asset rating encompasses its local operations
and does not include its overseas asset management activities,
wealth and private banking management areas and/or those related to
funds of funds managed by third parties, which have their own
processes and policies and are segregated from the management of
proprietary funds.
BTG Pactual Asset's 'M1 (bra)' rating is based on the following
category scores, which represents a scale from 1 to 5, with 1 as
the highest possible score:
Company & Staffing: 1.75
Risk Management and Controls: 1.75
Portfolio Management: 1.50
Investment Administration: 2.00
Technology: 2.00
BTG Pactual Asset's experience and franchise in the Brazilian
funds industry is strong, with good results and revenue generation.
The third-party management business is one of the BTG Pactual
group's main business lines and the funds managed are significant
in the product mix offered to the group's clients, accounting for
50% of its high fee income.
With a local market share of 4.7% at FYE11, BTG Pactual Asset
was the sixth largest third-party asset manager in Brazil (the
largest without a retail network) and the eighth in terms of funds
under management, with BRL85 billion and BRL91 billion,
respectively.
Following the group's strategy, the asset manager intends to add
to its overseas business, taking advantage of the greater flow of
resources to Brazil. The group has established brokerage houses in
important international financial centers, as well as having
recently acquired an important Chilean broker. This expansion will
diversify its investor base and expand the volume under management,
which will require platform integration in the different locations
and greater attention to risk controls.
Fitch considers that the client and product base is still
concentrated and that the asset manager has a relatively lean risk
control team, some of the main challenges for its development going
forward, as well as the group's internationalization process.
Nevertheless, the agency believes the investments made and
continued improvement in tools and systems can accommodate expected
growth.
Strong integration with the group and the exploitation of
synergies have translated into optimization of the team and costs,
as well as the use of consistent, comprehensive and well-planned
management practices and processes, risk controls and compliance,
without adding conflict of interest risks to the asset manager's
operations. Fund limits have not shown significant non-compliance
breaches (only some in terms of concentrations), with great
emphasis on liquidity.
The investment process is one of BTG Pactual Asset's strong
points. It is well-formalized and executed through committees by a
highly qualified team. The asset manager has maintained growth of
its assets under management above that of the industry (23% and 13%
in 2011, respectively), a trend that is expected to be maintained
in 2012. This expansion is a reflection of the good performance of
the funds managed and its good access to different distribution
channels, as well as the fact that it is part of a complete
merchant bank, with strong relationships with companies and
investors.
Fiduciary management has good process automation, heavily
focused on gains of scale and system improvement, presenting an
advanced degree of operational risk control and formalization of
procedures.
The BTG Pactual group has a robust and integrated technology
area. The contingency plans are well-prepared and formalized, with
redundancy in all critical systems and simulations and exercises in
regular business continuity. Despite its good processes and
systems, the group is altering its entire technology structure with
the assistance of a renowned consultant, as it seeks a greater
global presence and growth of assets under management, while
maintaining agility and security in controlling information and
decision making.
Founded in 1983 as a brokerage house, the BTG Pactual group
began to manage investment funds in 1984, separating this activity
from the bank's operations in 2000 and constituting BTG Pactual
Asset. BTG Pactual Asset has been prominent for its multi-market
funds, which represent 63% of total funds under management. It
focuses exclusively on providing third-party asset management
services through investment funds or administered portfolios,
offering a wide variety of investment products.
The rating may be sensitive to significant adverse changes to
any of the aforementioned rating drivers. A material deviation from
Fitch guidelines for any rating driver could cause the rating to be
lowered by Fitch. For additional information on Fitch asset
managers' guidelines, please refer to the criteria referenced
below, which can be found on Fitch's websites, at
'www.fitchratings.com' or 'www.fitchratings.com.br'.
Additional information is available at
'www.fitchratings.com'.The ratings above were solicited by, or on
behalf of, the issuer, and therefore, Fitch has been compensated
for the provision of the ratings.
Applicable Criteria and Related Research:
--'Reviewing and Rating Asset Managers' (Aug. 13, 2010);
--'National Scale Asset Manager Rating Criteria' (July 2,
2010).
Applicable Criteria and Related Research:
Reviewing and Rating Asset Managers
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547947
National Scale Asset Manager Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=536665
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