Fitch Affirms Brasil Plural Gestao de Recursos Ltda.'s Asset Manager Rating at 'High Standards'

SAO PAULO & RIO DE JANEIRO--()--Fitch Ratings has affirmed the International Asset Manager Rating of Brasil Plural Gestao de Recursos Ltda. (BPGR) at 'High Standards'. The Rating Outlook is Stable.

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 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 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: maintaining the good performance of the funds in an environment of strong volatility and competition, reducing key-personnel risk and continuing with its investor base diversification process.

The 'High Standards' rating is based on the following category assessments:

Company: High

Controls: High

Investments: High

Operations: from High to Highest

Technology: High

Company

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 manager is specialized in higher value added strategies, such as long & short. The group is controlled by eight shareholders, who participate in its executive committee. The manager's chief executive, the CIO Carlos Rocha, is a partner of the group.

In December 2014, Brasil Plural group entered into a joint venture with two family offices (Asset Financial Services and Tribeca Partners), creating a new company, Triar Gestao de Patrimonio. Brasil Plural Chief Commercial Officer left the group to become CEO of the new company. The purpose of this initiative is to gain economies of scale, optimizing its operational structure and reducing costs; and expand the range of investment solutions offered to its clients. This association had no relevant impact on the operational risk of BPGR.

As of December 2014, BPGR reported AUM of BRL5.7 billion in traditional funds, with an investor profile as follows: distributors (31%), pension funds (26%), institutional/corporate (16%), private banking (11%), retail (6%) and others (10%). The assets under management are concentrated in multimarket funds (51%) and equity (10%), as well as a relevant and growing amount in fixed income (39%). The AUM has strongly increased since the manager's inception (65% in 2014 alone), well-above the local sector average, due to the solid performance of the funds, despite presenting some volatility in the more sophisticated funds. Fitch's rating considers the manager's structure in the context of current levels of AUM, and number and complexity of its investment strategies.

Controls

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 manager uses proprietary pre-trading compliance controls, which are verified by a proprietary system (Plural Trading) implemented in 2013. 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 material operating losses were reported in 2014.

Investments

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 managers having a certain level of autonomy in their decisions, all committee guidelines must be complied with.

Its investment team is made up of qualified and experienced professionals and consists of one CIO, four managers and 11 analysts, which is adequate for its number of strategies and funds. Early in 2015, the senior FX PM was transferred to lead Banco Brasil Plural's treasury department, without disruption in fund management; while the senior FI PM also assumed the responsibility for structuring commercial area processes, which Fitch notes is not consistent with best practices in terms of functional segregation. 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.

Operations

BPGR provides very good communication materials to its investors, with good adherence to all disclosure requirements of the Brazilian Securities and Exchange Commission (CVM) and of the Brazilian Association of Entities of the Financial and Capital Markets (Anbima). The fiduciary and custody activities are mostly carried out by the BNY Mellon and Bradesco groups, both recognized institutions.

In 2014 BPGR acquired the wealth and asset management portfolios of Espirito Santo Investment Bank Brasil (subsidiary of Banco Espirito Santo). The AUM involved in this transaction was of BRL1.5 billion (BRL600 million for the asset manager). BPGR's operating area has quickly and smoothly carried out the transition of mandates. This area relies on a team and systems which allow relevant AUM growth without significantly increasing the operating risk. This transaction demonstrated the operational capabilities of BPGR and its flexibility to receive new mandates, which is aligned to asset management best practices. 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.

Technology

BPGR relies on a solid IT structure, with professionals dedicated to the development of proprietary systems customized to the manager's needs. In 2013, the company made high investments in infrastructure and tools which enabled increased automation of its processes, as well as a higher level of safety 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.

Company Profile

Founded in 2009, Brasil Plural Gestao de Recursos, is an asset manager focused on higher value added strategies. It maintained AUM of BRL5.7 billion, as of December 2014. With offices in Sao Paulo (SP) and Rio de Janeiro (RJ), it holds a partnership model with 16 investment professionals.

RATING SENSITIVITIES

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.

Additional information on Fitch's asset manager rating criteria is available in the criteria mentioned below, available at 'www.fitchratings.com' or 'www.fitchratings.com.br'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

-- 'Asset Manager Rating Criteria' (May 6, 2014).

Applicable Criteria and Related Research:

Asset Manager Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=747701

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=984687

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Contacts

Fitch Ratings
Primary Analyst:
Alexandre Yamashiro, CAIA, +55-11-4504-2606
Director
Fitch Ratings Brasil Ltda.
Alameda Santos, 700, 7th floor, Cerqueira Cesar
Sao Paulo - SP - CEP: 01418-100
or
Secondary Analyst:
Pedro Gomes, +55-11-4504-2604
Director
or
Committee Chairperson:
Davie R. Rodriguez, CFA, +1-212-908-0386
Senior Director
or
Media Relations:
Jaqueline Carvalho, Rio de Janeiro, +55-21-4503-2623
jaqueline.carvalho@fitchratings.com
Elizabeth Fogerty, New York, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst:
Alexandre Yamashiro, CAIA, +55-11-4504-2606
Director
Fitch Ratings Brasil Ltda.
Alameda Santos, 700, 7th floor, Cerqueira Cesar
Sao Paulo - SP - CEP: 01418-100
or
Secondary Analyst:
Pedro Gomes, +55-11-4504-2604
Director
or
Committee Chairperson:
Davie R. Rodriguez, CFA, +1-212-908-0386
Senior Director
or
Media Relations:
Jaqueline Carvalho, Rio de Janeiro, +55-21-4503-2623
jaqueline.carvalho@fitchratings.com
Elizabeth Fogerty, New York, +1-212-908-0526
elizabeth.fogerty@fitchratings.com