Fitch Affirms Brasil Plural Gestao de Recursos Ltda.'s Asset Manager Rating at 'High Standards'
KEY RATING DRIVERS
The 'High Standards' rating assigned to BPGR reflects Fitch's opinion that the investment platform and operational framework of the asset manager are strong relative to the standards applied by institutional investors in international markets.
The rating factors in the experience and qualification of BPGR executives, the strong growth of its assets under management (AUM), as well as the asset manager's well-formalized and consistent investment process practices. The rating further reflects BPGR's sound risk control, compliance and governance structure, in addition to the supporting services provided by recognized specialized companies, such as BNY Mellon and Bradesco groups.
The rating applies only to the asset manager's traditional fund activities in Brazil and does not cover private equity and structured funds operations in Brazil and abroad. These activities are carried out by other areas of Brasil Plural group and have their own processes and management policies.
Fitch believes that BPGR's main challenges are: to recover the good short-term performance of its funds, mainly in value added products (multimarket funds class and active equities portfolios) against a backdrop of high volatility and strong competition, to reduce key personnel risk and to keep the process of diversification of its investor base.
The 'High Standards' rating is based on the following category assessments:
Founded in 2009, BPGR is part of Brasil Plural, a solid financial group, which operates in different segments of the capital market through its business units (investment bank, and brokerage house among others). The asset manager is specialized in higher value added strategies, such as long & short equity strategies. The group is controlled by eight shareholders, who participate in its executive committee. The asset manager's main executive, the CIO Carlos Rocha, is a partner of the group.
As of March 2016, BPGR reported AUM of BRL9.96 billion in traditional funds, 72% growth in 2015, well-above the local sector average. The current investor profile is: pension funds (37%), distributors (28%), institutional/corporate (15%), private banking (9%), retail (3%) and others (8%). The assets under management are concentrated in multimarket funds (52%) and equity (17%), as well as a relevant and growing amount in fixed income and others (31%). Although funds' performances were very good in 2015, its main equity and multimarket funds underperformed in 1H16. As asset prices reflected an increased optimism about Brazil, contrary to the BPGR negative view, BPGR's funds weren't able to appropriately capture the new scenario. BPGR's credit funds have performed well in the period.
Fitch views the risk management structure as sound, relying on weekly committees, daily risk reports and strong controls and policies. The risk area reports to the group's CRO, while the internal controls and compliance area reports to the COO. BPGR monitors the market risk and liquidity of all its portfolios and funds, on a daily basis. The asset manager uses in-house pre-trading compliance controls, which are verified by a proprietary system (Plural Trading). Fitch views the controls as strong and adequate to sustain the manager's AUM growth. Fund limit mismatches have been rare and promptly resolved. No relevant material operating losses were reported in 2015 and in the 1H2016.
BPGR's investment team is made up of qualified and experienced professionals and consists of one CIO, four portfolio managers, four fixed income analysts, five equity research analysts and three economists, which is adequate for its number of strategies and funds. In 2015, BPGR successfully launched a fund that invests in tax-exempt infrastructure securities, thus adding a new credit strategy to its product offering.
BPGR's investment process is well-structured, based on committees following a top-down approach, with detailed strategies, supported by good proprietary analyses of the companies. Despite portfolio managers having a certain level of autonomy in their decisions, all committee guidelines must be complied with. In the 1H16, BPGR's main funds underperformed their benchmarks, which triggered the development of new policies to mitigate liquidity risks and, increase portfolios' diversification, thus demonstrating the asset manager ability to adjust its processes to changing market conditions. Key-personnel risk exists, given the relevance of the CIO in the decision making process. This risk is mitigated by the CIO's personal investment stake in the group and by the existence of senior co-managers with voting rights in a disciplined investment process.
This area relies on a team and systems which allow relevant growth in AUM and number of mandates without significantly increasing its operational risk. The reconciliation of the whole operating procedure is carried out by the middle office area, through a proprietary system (Plural Trading). The procedures carried out by the middle and back office areas are standardized and well-integrated to the platforms of its external service providers. The fiduciary administration and custody activities are mostly carried out by the BNY Mellon and Bradesco groups, both recognized institutions.
BPGR relies on a solid IT structure, with professionals dedicated to the development of proprietary systems customized to the asset manager's needs. The company has made high investments in infrastructure and tools which enabled increased automation of its processes, as well as a higher level of security and scalability. The manager relies on a good risk system (provided by Bloomberg), adequate for its needs. BPGR also has a strong backup structure for its critical databases, further providing sound safety and contingency resources.
Founded in 2009, Brasil Plural Gestao de Recursos, is an asset manager focused on higher value added strategies. It maintained AUM of BRL9.96 billion, as of March 2016. With offices in Sao Paulo (SP) and Rio de Janeiro (RJ), it holds a partnership model with 17 investment professionals.
RATING SENSITIVITIES AND SURVEILLANCE
BPGR's rating can be sensitive to relevant adverse changes to any of the major fundamentals mentioned above, such as a weakening of its financial profile, high professional turnover or deterioration in its processes and policies. A major deviation from Fitch guidelines in relation to any key factors can lead to a rating downgrade.