Fitch Affirms Fator Administracao de Recursos' National Asset Manager Rating
SAO PAULO & RIO DE JANEIRO -- December 17, 2012
Fitch Ratings today affirmed the National Asset Manager Rating 'M2-(bra)' (M2
minus (bra)) of Fator Administracao de Recursos Ltda. (FAR).
The 'M2-(bra)' rating is assigned to asset managers that demonstrate low
vulnerability to operational and investment management failure compared with
other asset managers in the same country.
FAR's National Asset Manager Rating reflects the asset manager's long track
record in equities and multimarket funds, supported by the adequate quality of
its investment process, with an emphasis on macroeconomic research and its
proprietary fundamentalist analysis of companies (bottom up). The rating also
considers FAR's good processes of controls, policies and compliance, as well
as the ongoing investments to support those activities, in addition to the
appropriate practices for funds accounting, settlement and custody.
Banco Fator S.A. (Fator) and its affiliated companies, such as FAR, have
undergone a significant restructuring process. Changes were made in the
composition and roles of FAR's senior management team in 2012 but without
significant impacts on its business model and investment decision-making
process. In the short term, this has had a neutral effect on funds'
performance and flows of the assets under management (AUM).
The investment process remains aligned with local market best practices.
Decisions are made on a collegiate basis and based on macroeconomic research
and fundamentalist analysis of companies to support asset allocation. The
portfolio management structure is segmented by type of strategy, allowing team
However, a longer period will be necessary to verify if the stability in
portfolios investment style will remain with the new organization of the
senior management. The asset manager maintains a relatively lean structure and
new changes on the investment team could introduce risks of continuity for its
development in terms of AUM flows, processes and control.
Roseli Machado, FAR's primary executive in Brazil since the creation of the
company, left the executive board in August 2012. She will be dedicated to
develop new projects for the asset manager overseas. The change in the
structure is part of a project that intends to expand the asset manager's
business to offer solutions to foreign and local investors in the medium term.
Her base will be in New York, in order to develop networks with foreign
investors for domestic products fundraising. FAR also aims to stimulate the
sales of products with cross-border investing to offer wide diversification to
its local investors, in the extent allowed by regulations, as a complement to
its existing strategies.
Roseli Machado continues to contribute to the asset manager's investment
process, despite her new role. Marcos Paolozzi was also hired in October 2012
as Director of fixed income and derivatives, previously under the
responsibility of Damont Carvalho in the last seven years. Patricia Stierli
has assumed FAR's general management and continues to be responsible for the
equities strategies and research team.
Risk management relies on good controls, policies, degree of automation and
formalization. These processes have been improved following the continuous
enhancements made since 2009, when the team was strengthened and investments
were made in controls and systems. The risk, compliance and internal control
structures are corporate-wide for the Fator group and adequate for the current
AUM and regulatory requirements, with appropriate independence and
supervision. Funds have not presented market risk limit breaches. Deviations
in concentration limits were low and promptly addressed.
The asset manager's AUM flows are expected to be favored in 2013, as well as
of its main competitors. The lower local interest rates environment may
continue to stimulate the migration to riskier assets in Brazilian industry.
On the other hand, FAR has a concentrated client base, with institutional
investors historically representing around 77% of the total AUM. Furthermore,
it has shown high AUM volatility, especially in periods of higher risk
aversion. AUM totaled BRL3.9 billion in September 2012 (BRL3.6 billion in 2011
and BRL5.9 billion in 2010), with around 35% in equities funds.
FAR relies upon good quality of outsourced services for fund accounting,
settlement and custody, primarily provided by specialized institutions such as
Itau Unibanco Holding S.A. (Local Currency IDR 'A-'/Outlook Stable).
Nevertheless, the asset manager's middle and back office areas carry out
reconciliation procedures to avoid operational failures in the settlement of
positions and the calculation of fund net asset value. FAR has also benefited
from improvements to its internal controls. The company systematically reviews
the efficiency ratios of its primary processes, which are applied to its main
The asset manager also has adequate technological platforms, with basic
security resources, supported by the corporate structure. The contingency plan
is satisfactory and is formally tested annually, with redundancy for the
Among the key challenges for FAR is to present lower AUM volatility and higher
diversification of its client base. Other challenges include the development
of the new organizational structure of the senior team, sustain good
performance on a recurring basis throughout market cycles and continuous
improvements in controls, as well as the implementation of the international
fundraising strategy in the medium and long terms.
FAR's rating 'M2-(bra)' is based on the following score categories, which
represent a scale from '1' to '5', '1' being the highest possible:
Organizational Structure and Teams: 3.00
Risk Management and Controls: 2.25 (from 2.50)
Portfolio Management: 2.50 (from 2.00)
Investment Administration: 2.25 (from 2.50)
FAR was established as an independent asset manager in 1997 and focuses on
active portfolio management of equity and multi-market fund classes, which are
more volatile by nature. The distribution between these products has changed,
although historically about 50% of AUM is related to equity strategies.
According to the Associacao Brasileira das Entidades dos Mercados Financeiro e
de Capitais (Anbima), FAR was the 49th largest Brazilian asset manager in
September 2012 with AUM of BRL3.9 billion and the 19th in equity funds.
FAR is a wholly owned subsidiary of Banco Fator S.A. with a track record in
equity research and transactions, mainly in mid- and small-caps companies
listed on BM&FBovespa (the Brazilian stock, commodities and futures exchange).
It was one of the pioneers asset managers in this sector.
The rating is sensitive to adverse changes in any key driver of its
classification, which could be altered in the event of a significant deviation
from Fitch's guidelines.
Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.
Related Criteria and Research:
--'Reviewing and Rating Asset Managers' (Aug. 13 2010);
--'National Scale Asset Manager Rating Criteria' (July 2, 2010);
--'Banco Fator S.A.' (Nov. 13, 2012).
Applicable Criteria and Related Research:
Reviewing and Rating Asset Managers
National Scale Asset Manager Rating Criteria
Banco Fator S.A.
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL,
COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE 'CODE OF CONDUCT' SECTION OF THIS SITE.
Alameda Santos, 700, 7th andar, Cerqueira Cesar - 01418-100 - Sao Paulo
Maria Rita Goncalves
Fitch Ratings Brasil Ltd.
Davie R. Rodriguez, CFA
Jaqueline Carvalho, +55 21 4503 2623 (Rio de Janeiro)
Elizabeth Fogerty, +1 (212) 908 0526 (New York)
Press spacebar to pause and continue. Press esc to stop.