Fitch Affirms Itau Asset Management's Ratings at 'Highest Standard'
SAO PAULO -- September 19, 2013
Fitch Ratings has affirmed the International Scale Asset Manager Rating at
'Highest Standard' for Itau Asset Management (IAM). The Rating Outlook remains
Key Rating Drivers
The rating affirmation of IAM's rating reflects its continued market
leadership in several investor segments, its large distribution channels, a
broad and diversified client base, robust revenue generation and the high
quality of its executive team. Moreover, the rating considers its well-planned
and disciplined investment process, strict risk and compliance policies and
strong investments in technology and controls. The rating also benefits from
the solid franchise of its parent, Itau Unibanco Holding S.A. (IUH; Issuer
Default Rating [IDR] 'A-'/Outlook Stable), the largest private financial
conglomerate in Brazil and Latin America.
IAM's rating applies to its activities in the domestic market and does not
include its overseas businesses and funds, private banking and third-party
funds of funds. It also does not consider Intrag DVTM, a company that offers
fiduciary administration and custody services to institutional customers,
among others services, and Kinea Investimentos Ltda., specialized in the
management of alternative investments. These operations all have their own
processes and policies, which are segregated from the management of
Fitch believes that IAM's main challenges are the group's internationalization
process, given its overseas expansion plans, and the strong competition from
other asset managers, mainly independents focused on more sophisticated funds,
and funding products in an environment of lower interest rates.
The 'Highest Standard' is based on the following assessments:
Company: Highest Standard
Controls: Highest Standard
Investments: Highest Standard
Operations: Highest Standard
Technology: Highest Standard
Asset manager operations in the 'Highest Standard' category demonstrate an
operational framework that Fitch considers superior relative to international
institutional investor standards.
IAM is part of a solid, well diversified and profitable financial
conglomerate, and remains as the largest private asset manager in Brazil, with
substantial experience in the local market and a relevant position in the
Brazilian funds industry. IAM's organizational structure is totally segregated
from the Itau Unibanco group's other activities, and it has a strong corporate
governance policy. The asset manager is very segmented, with well-planned
processes and highly qualified seasoned professionals.
IAM has undergone a major restructuring in 2013, in connection with a similar
initiative at the group level, with the objective of simplifying the
institution to achieve greater agility and efficiency gains. Together with the
retirement of a number of executives, this process resulted in several changes
in the asset manager's senior team this year including the CIO, currently
Marcelo Siniscalchi, and the director of risk and compliance, now Gabriel
Moura, among others. These changes, however, did not affect the continuity of
IAM's processes and strategy, as, in fact, most of the new executives already
belonged to the Itau Unibanco group.
The profile of assets under management (AUM) tracked the greater investor
demand for fixed income funds (63% of AUM at 1H'13, versus 45% in 2010), due
to the decline in interest rates. Nevertheless, the growth in AUM has remained
below that of the industry since December 2009, with competitive pressures
from other asset managers and funding products, as well as private credit.
IAM's strategy and main challenge is to achieve greater global positioning,
given its predominantly local presence. The asset manager has signed alliances
with international institutions and made significant investments in platforms
for overseas distribution, product offerings and global-standard systems.
IAM's risk management and compliance is supported by a robust and independent
organizational structure, with strong governance and supervision. The funds
have not reported breaches of their market and liquidity limits and breaches
in concentration limits have been low and promptly resolved. IAM is implanting
new market and liquidity risk systems, which are expected to further improve
integration of its operations and reduce operational risks, among other
Fitch considers IAM's investment process structure to be one of the best among
asset managers in the Brazilian market. The process is well formalized and
segmented, with highly specialized teams, including a centralized trading area
(except for the high Alpha funds), and based on committees supported by
macroeconomic, fundamentalist and quantitative research. The robust and very
experienced investment team enjoys the support of the risk control area for
on-line simulations, as well as sophisticated systems that enable pre-trading
alerts and blocks, among other facilities. The replacement of the CIO at the
beginning of 2013 did not result in major changes to the investment process,
despite his greater presence in portfolio decision making.
Similar to other large bank-affiliated asset managers in Brazil, the fiduciary
administration and custody activities are developed by another business unit
of the group. This unit is well known in its business segment for providing
services to other asset managers in the local market. The processes observe
regulations and best practices, supported by safe and robust technological
platforms and a robust corporate structure. It presents good process
automation, with large gains of scale and an advanced degree of risk control
through indicators that monitor the services provided.
Itau Unibanco group relies upon a robust technological area and solid
technological platform that supports IAM with strong management systems, risk
controls and an automated and integrated back office. IAM has made large
investments in systems and controls, constantly improving. It is implanting a
renowned front and middle office (Charles River) and market and liquidity risk
control (Sophis) systems, among others, that enable greater integration of
these functions, as well as increasing the degree of automation and
Founded in 1965, IAM is the second largest asset manager in Brazil, with a
15.2% market share and AUM of BRL323 billion at 1H'13, according to the
Associacao Brasileira das Entidades dos Mercados Financeiro e de Capitais
(Anbima). IAM is a business unit of IUH, the largest private financial
conglomerate in Brazil and Latin America and the national leader in auto
financing and credit cards, among other segments.
The rating of IAM could be sensitive to important adverse changes in any of
the above mentioned key drivers, notably a weakening in its financial profile,
high turnover of professionals or deterioration in its processes and policies.
An important deviation in the Fitch guidelines for any key driver could result
in a rating downgrade.
To obtain additional information on Fitch's criteria for rating asset
managers, consult the criteria mentioned below, available on Fitch's websites,
'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
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Pedro Gomes, +55-11-4504-2604
Fitch Ratings Brasil Ltda.
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