Brazil’s largest asset manager is being structured to sophisticate products

07/06/2022

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Aroldo Medeiros — Foto: Silvia Zamboni/Valor

BB DTVM, Banco do Brasil’s asset manager and the largest such company in the country with R$1.5 trillion under management, has always been known for its size, but also for being slower in the process of product sophistication. However, a set of measures is being taken under the management of Aroldo Medeiros, CEO of the asset management firm since December 2020, in the sense of modernization, with the aim of putting BB DTVM at the same level of other large management companies considered to be cutting edge.

“The phase in that the retail investor liked DI [interbank deposit] funds and passive fixed-income funds is over. The small investor is more informed every day and wants different products, and we are following this movement, with new products and an active management,” Mr. Medeiros told Valor Investe. He has been with Banco do Brasil for 38 years and, a year and a half ago, took over as BB DTVM’s CEO, replacing Carlos André, currently the CEO of Santander’s asset manager.

One of the fronts of this modernization drive is the various partnerships being made, both in the management and distribution of funds, as well as in the attraction of clients. In the distribution area, the company is currently selling its funds on 16 investment platforms and has recently closed an agreement with four independent financial advisers with client portfolios specialized in pension funds.

There are also partnerships with international asset managers, with whom BB DTVM has mirror funds, and, according to Mr. Medeiros, new agreements with foreign asset managers are expected to be announced soon. “We want to offer the best to our clients, here in Brazil or abroad, whether they are managed by us or by third parties,” Mr. Medeiros said.

As for management itself, BB DTVM is structuring new areas exactly in order to be able to analyze and, therefore, place increasingly sophisticated assets into the portfolios.

The asset manager has set up an active fixed-income analysis and operations desk with the aim of buying securities that offer returns well above the interbank benchmark rate CDI. And, more recently, it has structured an analysis desk for riskier and more volatile securities (known in the market as high alpha) and another for quantitative analysis, which uses mathematical and statistical models to monitor market behavior and thus identify investment opportunities. Mr. Medeiros says that other important fields for active management and more complex assets are being designed and are expected to be ready soon.

The growing demand from investors for more complex products justifies BB DTVM’s focus on the support structure for analysis and selection of assets that go beyond the basics, both in fixed and variable income.

Mr. Medeiros recalls that the fall of benchmark interest rate Selic to the floor of 2% per year led a good part of the clients to migrate to hedge funds, corporate debt funds, ESG funds, infrastructure funds, cryptocurrency funds, and Fiagro (Investment Funds in Agroindustrial Productive Chains), among others.

However, with the current rise in the Selic rate, which is now 13.25% per year, BB DTVM, as well as assets managers of other large banks, has seen a wave of redemptions of its retail funds. In the year to May, redemptions in BB DTVM’s retail funds totaled R$12 billion, according to Morningstar data.

According to Mr. Medeiros, in general, this money that has been leaving the funds is going to products essentially offered by banks, such as certificates of bank deposit (CDBs), certificate of real-estate receivables (CRIs) and agribusiness receivables certificates (CRAs). He says, however, that these redemptions are very small compared to the stock in retail portfolios now, and that the greater trend of going to more sophisticated products has not been broken.

“The most complex products continue to receive new funds and, at the slightest sign that monetary tightening has come to an end, these investments will once again become relevant, just as they were until the Central Bank had to act with the Selic to tame inflation,” says the executive. “Investors today are much more mature, and the search for more structured assets is here to stay, even with this short-term setback, with the rise in interest rates,” he added.

*By Daniele Camba — São Paulo

Source: Valor International

https://valorinternational.globo.com/