SAO PAULO, Brazil & NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the International Scale Asset Manager Rating for HSBC Multimanager Funds (Brazil) (HSBC Multimanager) at 'Highest Standards'. The Rating Outlook remains Stable.
Key Rating Drivers
The 'Highest Standards' rating for HSBC Multimanager reflects Fitch's view that the company's investment platform and operating framework are superior relative to the standards applied by international institutional investors.
The rating affirmation of HSBC Multimanager reflects its strong integration with the group's global fund of funds unit in the adoption of policies and controls; the benefit of the robust franchise of its parent, HSBC Holdings Plc. (HSBC Holdings, Fitch Issuer Default Rating [IDR] 'AA-'/Outlook Stable), one of the largest financial conglomerates in the world; high degree of formalization in its asset manager selection and portfolio construction processes and policies, and well-structured and consistent risk and compliance controls.
HSBC Multimanager's rating applied to its Brazilian domiciled investment activities and does not include its overseas, private banking, fiduciary administration and custody operations, as well as traditional investment fund activities. Those operations have their own processes and policies, which are segregated from the funds of funds from third-party asset managers.
Fitch believes that HSBC Multimanager's main challenges are the high competition from independent asset managers in the segment of more sophisticated funds, and to implement projects and systems for control improvement and efficiency.
The 'Highest Standard' rating is based on the following assessments:
| Company: Highest Standards |
| Controls: Highest Standards |
| Investments: Highest Standards |
| Operations: Highest Standards |
| Technology: High Standards |
Company
HSBC Multimanager is the unit responsible for funds of funds from third-party asset managers of HSBC Gestao de Recursos Ltda. (HSBC Gestao). HSBC Multimanager held assets under management (AUM) of BRL7.6 billion in June 2013, with a focus on multimarket funds (81% of AUM). HSBC Gestao is the seventh largest asset manager in Brazil with AUM of BRL87 billion. It is part of a retail bank in Brazil, with a large distribution network and client base, and belongs to a solid financial global conglomerate that is widely diversified and profitable.
Its organizational structure is fully segregated from the other activities of group HSBC, and it has strong governance and compliance policies. It also relies on a good structure and on qualified and experienced professionals, with no turnover since early 2011. The company has strong experience in the funds industry, and has recorded high AUM growth since 2008 (28% in 1H13), mainly in pension funds. These investors reached a 45% share of AUM (14% as of December 2010) while the balance belonged to private investors (43%) and retail (12%).
Controls
HSBC Multimanager relies on a strong and independent risk and compliance structure, following the group's global methodologies and guidelines. The asset manager presents robust operating risk controls, well-formalized and documented compliance policies and procedures, as well as solid market risk and liquidity controls and policies. Limit breaches have been low and promptly addressed. Controls are performed by the group's corporate structure on a daily basis and also weekly by a renowned specialized firm. Limit mismatches have been low and promptly solved.
The integration of risk and control areas with the parent company was reinforced at year-end 2012, following the group's global guidelines. These areas started to report directly to their respective global lines, aiming at greater synergy in their practices, such as has happened with the compliance and products areas. The control structure already offered good integration with the parent company, besides relying on the support of committees and widespread and consistent controls.
Investments
The manager maintains a robust investment process, based on committees, a few of which have executives from the parent company, and macroeconomic analyses and asset manager and fund selection research. The process is well-formalized, with solid due diligence procedures and systemic research into funds along with asset managers to support allocation decisions. The management approach is 'top-down' for allocation in funds strategy classes and 'bottom-up' for funds selection in each category.
Operations
Fiduciary and custody activities are conducted by another business unit of the group, as in other large asset managers linked to banks in Brazil. The processes follow regulation and best practices and are supported by a robust technological platform and corporate structure, with good process automation. In addition, the middle-office and market risk areas carry out the reconciliation of the entire operating process.
Technology
HSBC Multimanager relies on solid asset management, risk control and back-office systems which are automated and integrated, in order to further benefit from the robust structure and technological platform of HSBC group. The manager has made large investments in systems and controls to improve the efficiency and agility of the processes. It is in the process of implementing a sophisticated front-office system which enables higher speed, pre-trading blockings and alerts, among other benefits.
Company Profile
HSBC Multimanager, created in 2000, is the unit responsible for funds of funds from third-party asset managers of HSBC Gestao. The latter is the seventh largest asset manager in Brazil with AUM of BRL87 billion and market share of 3.6% locally in June 2013, according to the Brazilian Association of Financial and Capital Market Entities (Anbima). HSBC Gestao is responsible for the third-party asset management of HSBC Bank Brasil S.A. - Banco Multiplo (HSBC Brasil), ranked as the fourth largest private bank in Brazil in terms of assets. The latter, in turn, is controlled by HSBC Holdings, one of the largest global financial conglomerates.
Rating Sensitivities
The ratings of HSBC Multimanager could be sensitive to adverse changes to any of the key drivers mentioned above, notably a weakening in its financial profile, high turnover of professionals or deterioration in its processes and policies. An important deviation from Fitch's guidelines for any key driver could also result in rating downgrades.
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'.
Applicable Criteria and Related Research:
-- 'Asset Manager Rating Criteria' (22 April 2013).
Applicable Criteria and Related Research:
Asset Manager Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=706476
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=806713
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