Julius Baer’s Brazilian Private-Wealth Firm Goes Local

Julius Baer Group Ltd.’s Brazil private-banking firm plans to open offices outside the nation’s two biggest cities to seek wealthy clients amid slower growth in the industry.

GPS Investimentos Financeiros & Participacoes SA, partly owned by Zurich-based Julius Baer, will hire about 15 people and open branches in Belo Horizonte and Porto Alegre to serve the states of Minas Gerais and Rio Grande do Sul, Jose Eduardo Martins, a partner and founder of GPS, said in an interview at the company’s Sao Paulo headquarters.

“The agricultural and mining commodities boom of the past years and the Brazilian emerging middle-class created a whole new world for wealthy people in Brazil that is far away from the big centers” in Sao Paulo and Rio de Janeiro, Martins said.

Growth in the industry will cool to 15 percent this year from 21 percent in 2012 as the nation’s economic rebound falls short of forecasts, Itau Unibanco Holding SA, Brazil’s biggest wealth manager, said in May. Credit Suisse Group AG, Brazil’s top merger adviser, said last month it’s increasing its focus on wealth management and will boost hiring in the same regions GPS is targeting.

Assets under management at GPS have grown to about 16 billion reais ($7.1 billion) from 11 billion reais in May 2012, and the number of employees increased to 102 from 90, according to Martins, who said GPS may also expand in other Latin American countries.

Sao Paulo

Sao Paulo state still accounts for the largest share of assets under management in the industry, with 56 percent of the total 532.4 billion reais outstanding in June, according to Anbima, the nation’s capital-markets association.

The Minas Gerais/Espirito Santo states and the Central-West regions are growing fastest, at 9.53 percent and 10 percent this year through June, respectively. Sao Paulo grew 0.81 percent in the same period as the overall market expanded 0.98 percent, compared with a growth rate of 8 percent for the first half of 2012, according to Anbima.

GPS is looking for local partners in the Northeast and Central-West regions. It already has a local partner in Fortaleza, the capital of the northeastern state of Ceara, which Martins declined to name.

Credit Suisse

Credit Suisse’s effort includes hiring for regional offices in Porto Alegre, Belo Horizonte and Rio de Janeiro, said Jose Olympio Pereira, the Zurich-based bank’s CEO for Brazil, in an interview in Sao Paulo last month. The bank, which has about 800 workers in Brazil, has doubled to 30 the number outside Sao Paulo in the past two years. It’s also seeking an executive to lead a team in Northeast Brazil.

Credit Suisse Hedging-Griffo, the bank’s asset-management unit, has 60 billion reais in private-banking assets under management. The business expanded 36 percent last year, compared with a 21 percent increase for the market overall.

GPS’s acquisition of the wealth-management boutique Bawm Investments announced in December was responsible for about 10 percent of GPS’s 40 percent growth in assets under management in the past 12 months, Martins said.

“Multifamily offices like GPS are taking clients from some banks because lower interest rates reduce returns on fixed-income investments and clients seek more advice and attention, which specialized houses can provide,” Martins said.

Economic Slowdown

Brazil’s economy expanded at an annualized rate of 1.9 percent last quarter, after annual growth averaged 3.8 percent from the end of 2003 through last year. Private-wealth managers benefited in the past decade as real average income rose 19 percent, according to IBGE, the nation’s statistics agency.

“The assets of the private-banking industry are growing much less this year than last year because portfolio returns are smaller since the average interest rate in Brazil shrank and the stock exchange isn’t performing so well,” said Geraldo Lamounier, a partner at GPS.

The benchmark Ibovespa index dropped 11 percent this year through yesterday.

The central bank’s benchmark Selic rate is 9 percent, compared with 10.5 percent in January 2012.

Last year’s 21 percent growth in the private-banking business followed a jump of almost 22 percent in 2011, according to Anbima. Since 2009, private wealth has grown 82 percent in Brazil, the world’s second-biggest emerging market behind China.

GPS’s strategy contrasts with Charlotte, North Carolina-based Bank of America Corp., which closed its Merrill Lynch private-banking operation in Brazil and dismissed about 40 people in 2011 to focus on more profitable businesses.

BTG Pactual

UBS AG was among the top three wealth managers in Brazil in 2009, when it sold the Brazilian unit to billionaire Andre Esteves and his partners, who created Grupo BTG Pactual. BTG now has 65 billion reais in private-banking under management.

Zurich-based UBS is building a new wealth-management business from scratch. The bank has 5.5 billion reais under management and sees Brazil as a priority, UBS said in a e-mailed statement, adding that it is also considering acquisitions.

GPS, founded in 1999 by Martins, Marco Belda and Roberto Rudge, attracted an investment last year from Julius Baer, Switzerland’s third-largest wealth manager, which purchased 30 percent of the company for an undisclosed amount. Julius Baer doesn’t have any plans currently to increase its stake in GPS, though it may decide to in the future, Martins said.

Julius Baer sees emerging markets as a place for new wealth creation, Chief Executive Officer Boris F.J. Collardi said Sept. 6 in an interview with CNBC. The bank’s goal is to boost assets under management from Asia, Latin America, the Middle East and Russia to 50 percent of the total, which is now 300 billion Swiss francs ($324 billion), from 37 percent, Collardi said to reporters in Hong Kong in May.

“Our partnership with GPS is doing very well,” Collardi said on an earnings call in February. “The honeymoon with GPS is continuing.”

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