Latin Finance - July/August 2010 - 22

brazil domestic buyside
cracks appearing in the bank distribution model, albeit hairline. De Araujo sees institutional funds as a priority area, and kicked off an effort to sell to them back in 2006. Institutional assets under management at GAP have grown quickly, from some 350 million reais in 2006 to 1 billion reais today, says de Araujo. To accelerate asset gathering, GAP this year hired sales and marketing staff from BNY Mellon, including Roberto Pitta who has close to 30 years experience in the industry. “We are very focused on this market and are expecting to raise a lot of money. We are seeing funds plump for equity longonly money and multi-manager funds. The next wave will be to invest in other alternative assets,” he predicts. Pension funds are increasingly professionally run and light years from the institutions of just 15 years ago, thinks Cardoso. The consultants are pushing a trend, already visible among larger funds, of moving away from a purely balanced portfolio construction to a roster of specialist managers. “We tend to advise clients to diversify and have more than one manager. As funds look to offer more investment options, this provides an opportunity to go along specialist lines,” Cardoso says. Funds are growing up: Cardoso Mauro Bergstein, managing director at Credit Suisse Asset Management (CSAM), joint venture, 2bCapital, with each owning which has some $3.8 billion under management, agrees that institutional 50% and plans for BRAM to provide fund money is key to growth. He has seen mandates. clients increasing allocation to private There is no reason that more deals equity, venture capital, corporate credit, will not come about in the future, thinks real estate and equity and related products. Pavarina, although she notes BRAM has Regulation change is pushing the process expanded its own fund offerings hugely and today offers a full palette of investment of taking more risk in open-ended funds, and investing abroad, he notes. products, including funds to cover small Both GAP and CSAM see areas such cap and large cap stocks, growth and value as infrastructure, private equity and real and infrastructure funds. estate offering opportunity, and both “We are very close to our clients and are marketing corporate credit funds in launch the products that make sense,” notes Pavarina. That limits the need to hire particular to institutional clients. There is plenty of scope for jazzing up outside managers. equity allocations. The typical Brazilian Tough Sell pension fund is still heavily weighted in the Independent asset managers argue that sovereign, with some 80% in fixed-income, a specialist approach and an increasing of which typically 70%-80% is government focus on direct sales to pension funds bonds. The move into equity has been will help them win business. However, steady, but there is still far to go. privately they admit this is a tough sell, The allocation does not hold true for and costly to put in place a substantial sales the larger funds, which tend to have a and marketing effort. There are, however, more generous helping of equity. Petros, Independent managers hope banks will farm out specific mandates. But Pavarina believes change will come slowly to this conservative industry. “I think we’ll take a long time to change. Banks are trustworthy and pension funds want to know who to blame if things go wrong,” she says. BRAM is dipping its toe into mandate outsourcing through a private equity fund jointly managed with Portuguese Banco Espírito Santo. The banks have set up a the country’s second largest fund with 51 billion reais in assets under management, has a 34% equity allocation, much higher than typical, with a further 2.3% allocation to property, says Luis Carlos Afonso, investment director for Petros in Rio de Janeiro. The fund has grown rapidly from 18.5 billion reais in 2002 when the equity portion was just 16%, notes Afonso. The last two years have been marked by an aggressive step-up in the fund’s equity allocations, he notes. “We increased our participation at the end of 2008 in a year of great turbulence. We bought stakes in companies which were very undervalued and often sought governance rights and board seats,” Afonso says. Petros holds as much as 10%-15% stakes in selected Brazilian companies, including energy-related Lupatech. It last year returned 42.8% from the equity portion of its portfolio.

Launching new products: Pavarina “We are at a moment that is historically promising and unique,” says Alfonso, speaking of the Brazilian economy. The wealth of opportunity on the ground means that the fund is unlikely to move immediately into foreign assets, in spite of the new legislation, he adds. LF

UPDATE
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22 LatinFinance

July/August 2010

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Latin Finance - July/August 2010

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