SAO PAULO & RIO DE JANEIRO--(BUSINESS WIRE)--Fitch Ratings has assigned an International Asset Manager Rating of 'Good Standards' to RB Capital Asset Management Ltda. (RB Capital). The Rating Outlook is Positive.
Key Rating Drivers
The 'Good Standards' rating assigned to RB Capital reflects Fitch's opinion that the manager's investment platform and operating framework are good relative to the standards applied by international institutional investors in global markets. The Positive Outlook reflects the implementation of systems aimed at improving risk controls and enabling more robust operational procedures.
RB Capital's rating factors in its well-formalized and consistent practices in its investment process, its solid risk and compliance controls, segregated activities relative to fiduciary administration and custody, in line with local market practices. The manager's rating also benefits from RB Capital Group's good corporate framework, its major investments in technology, and satisfactory distribution channels.
The rating assigned to RB Capital Asset Management only applies to its domestic real estate fund activities. It does not apply to other businesses areas such as the management of credit funds, fiduciary administration and custody, which have their own processes and policies that are segregated from the management of real estate funds.
In Fitch's opinion, RB Capital's key challenges are maintaining the high and consistent performance of its funds through the economic cycle and a backdrop of increasing interest rates, as well as maintaining the firm's reputation in the domestic real estate market, and reducing key personnel risk.
RB Capital's 'Good Standards' rating is based on the following assessments:
Company: Good
Controls: High
Investments: High
Operations: Good
Technology: Good
Company
RB Capital Asset Management is an experienced asset manager focused primarily on managing real estate funds, with a growing business in credit funds, both of which manage domestic Brazilian assets. It is a fully owned subsidiary of RB Capital Holding, a company that originates, structures, and distributes investment products focused on the Brazilian real estate market. RB Capital asset management's organizational structure is segregated from the other activities of the holding company, with good corporate governance and compliance policies. Despite being lean, RB Capital's control framework relies on well-planned processes and highly qualified and experienced professionals.
RB Capital Asset Management is one of the group's main business units, accounting for approximately 10% of its earnings. As of September of 2013, RB Capital has reported a CAGR (Compounded Annual Growth Rate) of 31% in its AUM since December 2008. Its AUM profile is segmented into real estate funds (70%) and credit funds (30%). Investments in the real estate funds follow three different strategies: income (40%), real estate development (30%) and construction financing (30%). As of September 2013, its investor profile included private (36%), corporate (31%), institutional (32%) and other (1%) investors.
Controls
RB Capital relies on an independent and well-organized corporate risk and compliance framework with monthly committees following well-defined criteria and guidelines. Despite not having a CRO (Chief Risk Officer), the risk and compliance area reports directly to one of the holding company's partners. The asset manager also has good operating risk controls, with low operational losses; well-elaborated and documented compliance policies and procedures; and systems and policies that adequately monitor and control for market risk and liquidity in its funds. The company adopts excellent practices in its daily monitoring of real estate projects, with its cash flows under strong controls and very good processes to evaluate credit, execution and liquidity risks. The funds have not reported relevant breaches during the last 12 months.
Investments
Fitch considers RB Capital's investment process to be strong, with regular committees supported by financial, legal, environmental and market research for each project. The process is well-formalized and carried out by qualified and experienced professionals. For each project, the investment process involves the following phases: origination of the deal; evaluation of the real estate developer, project and market; negotiation of the deal structure; investment committee; legal, financial and environmental due diligence; independent due diligence by a third party; ratification of the investment; closing of the deal. Moreover, all the funds have clearly defined concentration limits, eligible assets, and eligible structures defined in the term sheets. Some funds also include restrictions on tenant types. All the mandates have clearly defined strategies (income, real estate development and construction finance) with proven adherence in monthly reports.
RB Capital has an adequate structure with seven investment professionals including two portfolio managers, five analysts to support investment decisions and portfolio monitoring, as well as seven middle office, back office and engineering personnel. Although key-personnel risk is present and company's managers have a strong influence on the decision-making process, this risk is mitigated by the partnership model adopted by the company and by the investment committees which serve as a forum for knowledge exchange on new investment opportunities and for evaluation of the existing portfolio.
As part of one of the pioneer groups operating in the real estate segment, the manager maintains long-standing relationships with many developers, which enables it a good access to specialists in different regions of the country and supports its capacity to originate good assets for its funds under management. Its mandates are clearly defined and divided into three basic strategies: income, real estate development and financing to constructions.
Operations
The fiduciary administration and custody activities are carried out by renowned companies (being concentrated at Citibank and Caixa Economica Federal). The processes comply with regulations and are supported by adequate technological platforms, with a good level of automation. Company's middle office area carries out the daily reconciliation of project cash flows and the monthly monitoring of the current stage of development of each work. All real estate appraisals and NAV calculations are performed by third-parties in accordance with each fund's characteristics and following the best market practices. RB Capital middle office area validates all pricing information.
Technology
RB Capital has adequate management, risk control and back office systems, conducted on Microsoft Excel spreadsheets using macros. The manager has regularly invested in technology to increase the efficiency and speed up its processes and is also implementing more robust systems to perform cash flow, risk (Nave System - Maps Solucoes e Servicos) and project monitoring (Viabil System - BDK Solutions) controls. It relies on pre-trading and post-trading controls via Excel, which are also migrating to more customized and automated technological platforms. Contingency plans are well-structured, with backups available for all critical systems, although without formal tests.
Company Profile
RB Capital Asset Management is an asset manager created in 2007, with AUM of BRL2 billion as of September 2013 (BRL1.4 million in the real estate market), managing real estate and credit funds.
Rating Sensitivities
The rating assigned to RB Capital Asset Management could be sensitive to important adverse changes in any of the key drivers mentioned above, notably a weakening in its financial profile, high turnover of executives or deterioration in its processes and policies. An important deviation from Fitch's guidelines for any key driver could also result in a rating downgrade.
To obtain additional information on Fitch's asset manager rating criteria, please refer to the criteria mentioned below, available on the agency'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' (April 22, 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=820543
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