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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