SAO PAULO--(BUSINESS WIRE)--Fitch Ratings has affirmed BTG Pactual Asset Management DTVM S.A.'s (BTG Pactual Asset) asset manager rating at 'Highest Standards', removed the rating from Rating Watch Negative and assigned a Negative Outlook.
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. While affirming BTG Pactual Asset's rating, Fitch made the decision to downgrade the Company Score to reflect the reduced financial flexibility and business resilience of the asset manager and the reduction in assets under management (AUM) of its core investment strategies.
Fitch is removing BTG Pactual Asset's rating from Negative Watch to reflect the diminishing impact of the arrest of the former CEO ) and main shareholder of Banco BTG Pactual S.A. (BTG Pactual) on the franchise and business prospects of the group and, consequently, on the asset manager. BTG Pactual Asset has been able to sustain an adequate level of AUM and profitability to support its business activities. In Fitch's view, the probability of another disruption of BTG Pactual Asset's activities has been reduced.
Additionally, Fitch is assigning a Negative Outlook to the asset manager to reflect the difficulties that BTG Pactual Asset will still endure in the near future. The asset manager suffered significant outflows during the last eight months (41% of the AUM) and made reductions in operations personnel to adjust it to its current size. BTG Pactual Asset may face challenges to sustaining its earnings generation and maintain its current investment capabilities coupled with a prospect of very unfavourable economic environment in the next two years.
The rating of the asset manager reflects the financial support of Banco BTG Pactual S.A. (BTG Pactual; IDRs 'BB-'/Negative Watch), 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.
In Fitch's opinion, BTG Pactual Asset's main challenges are: to reestablish its business franchise, regain investors' confidence, increase the AUM of its funds, and retain its key investment professionals.
The 'Highest Standards' rating is based on the following assessments:
Company: High, from 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 seventh largest asset manager in Brazil, with 2.5% market share and AUM of BRL76.7 billion in June 2016.
RATING SENSITIVITIES
The Outlook on the ratings could be revised from Negative to its previously Stable Outlook if BTG Pactual Asset's business franchise is able to increase its AUM in order to support its profitability and retain its key investment professionals, even in a challenging investment environment.
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
Relatￃﾳrio de Metodologia: Anￃﾡlise 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=1010581
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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