Fitch Maintains BTG Pactual Asset Management on Negative Watch

SAO PAULO--()--Fitch Ratings has maintained BTG Pactual Asset Management DTVM S.A.'s (BTG Pactual Asset) asset manager rating of 'Highest Standards' on Rating Watch Negative (RWN).

KEY RATING DRIVERS

BTG Pactual Asset Management's 'Highest Standards' rating reflects Fitch's opinion that the manager's investment platform and operational framework are superior relative to the standards applied by institutional investors in international markets.

Fitch is maintaining the RWN on BTG Pactual Asset's rating to reflect the continued uncertainty surrounding the impact of the arrest of the former CEO of Banco BTG Pactual S.A. (BTG Pactual, IDRs 'BB-'/RWN)) and main shareholder on the franchise and business prospects of the group and, in turn, the asset manager. BTG Pactual Asset suffered significant outflows following the arrest; however, the asset manager was able to successfully manage through this stressed period where it experienced outflows of 36% of the AUM and made some reductions in personnel to adjust the business to its current size. Outflows seem to have stabilized.

The RWN considers the prevailing uncertainties surrounding BTG Pactual Asset's future ability to sustain its earnings generation and maintain its current investment capabilities following these events coupled with a very unfavorable economic environment. The RWN considers similar concerns on the related to the parent company, particularly with respect to its ability to continue to be a source of support for the asset manager. For further information regarding Fitch's views on the parent company, please see the rating action commentary published on Feb. 26, 2016, 'Fitch Maintains Banco BTG Pactual and Sub's Ratings on Rating Watch Negative', available at www.fitchratings.com).

The rating of the asset manager reflects the financial support of Banco BTG Pactual, its parent company. The rating also considers its disciplined investment process, qualified and experienced management, and robust risk controls and compliance framework.

BTG Pactual Asset's rating applies only to its Brazilian operations in traditional funds and does not include its overseas asset management activities, wealth management, private equity and private banking areas, or those related to real estate funds and third-party funds of funds. All these activities have their own processes and policies and are segregated from the management of traditional funds.

BTG Pactual Asset's main challenges include:

--Re-establishing its business franchise;

--Regaining investor confidence;

--Increasing the AUM of its funds; and

--Retaining its key investment professionals.

The 'Highest Standards' rating is based on the following assessments:

Company: Highest

Controls: Highest

Investments: Highest

Operations: Highest

Technology: High

Company Profile

BTG Pactual Asset is a full subsidiary of BTG Pactual. Founded in 1983 as a brokerage house, the BTG Pactual group began to manage investment funds in 1984. BTG Pactual Asset is the sixth largest asset manager in Brazil, with 3% market share and AUM of BRL92 billion in March 2016.

RATING SENSITIVITIES

BTG Pactual Asset's asset manager rating could be downgraded if the current situation undermines the financial profile of its parent company and hampers its business franchise resulting in a material deterioration of its financial profile or its ability to continue to perform its activities appropriately. Significant turnover in investment personnel which would negatively impact BTG Pactual Asset's investment management capabilities may also result in a downgrade.

The ratings could be removed from RWN and a Stable Outlook assigned if BTG Pactual Asset's business franchise exhibits resilience and is able to maintain relatively stable AUM levels and profitability.

BTG Pactual Asset's rating could be sensitive to relevant adverse changes to any of its rating drivers, particularly in case of a weakening of its financial profile, high turnover of key staff, or deterioration in processes and policies.

For additional information on Fitch's criteria for rating asset managers, consult the criteria mentioned below, available on Fitch's websites, at 'www.fitchratings.com' or 'www.fitchratings.com.br'.

Additional information is available on www.fitchratings.com.

Applicable Criteria

Asset Manager Rating Criteria (pub. 06 May 2014)

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

Relatório de Metodologia: Análise e Rating de Gestores de Recursos (pub. 04 Nov 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873367

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1005104

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Alexandre Yamashiro, CAIA
Director
+ 55-11-4504-2606
Fitch Ratings Brazil Ltda.
Alameda Santos, 700 - 7th floor
Cerqueira Cesar - Sao Paulo - SP
or
Secondary Analyst
Tiago Carrara
Associated Director
+ 55-11-4504-2217
or
Committee Chairperson
Davie Rodriguez, CFA
Senior Director
+1-212-908-0386
or
Media Relations
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Alexandre Yamashiro, CAIA
Director
+ 55-11-4504-2606
Fitch Ratings Brazil Ltda.
Alameda Santos, 700 - 7th floor
Cerqueira Cesar - Sao Paulo - SP
or
Secondary Analyst
Tiago Carrara
Associated Director
+ 55-11-4504-2217
or
Committee Chairperson
Davie Rodriguez, CFA
Senior Director
+1-212-908-0386
or
Media Relations
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com