ITAÚ UNIBANCO HOLDING S.A. Fitch Ratings has affirmed Itau Asset Management's (IAM) 'Excellent' Investment Management Quality Rating.
The Rating Outlook remains Stable.
The asset manager's rating considers only activities in the domestic market and does not include funds abroad, funds of funds and private banking activities. Nor does it consider other companies in the group, such as Intrag DTVM, which provides fiduciary and custody services to institutional clients, and Kinea Investimentos Ltda., which is dedicated to the management of alternative investments. All these operations have their own processes and policies, and are segregated from the funds managed by IAM.
KEY RATING DRIVERS
IAM's 'Excellent' rating reflects Fitch's opinion that the investment manager has extremely strong investment capabilities and operational characteristics in relation to the investment strategies offered.
The rating also reflects the manager's well-established and disciplined investment process, highly qualified and experienced team, robust risk and compliance policies, and strong technological infrastructure. IAM has robust revenue generation, with extensive distribution channels and a diversified customer base. IAM's rating also considers the benefits of being part of the
Fitch believes IAM's main challenges are maintaining its market share in the Brazilian asset-management industry, which has been slightly decreasing in the past few years; maintaining high profitability levels; finishing and consolidating its technological developments and projects; and preserving the good performance of its funds.
The 'Excellent' rating is based on the following classifications:
Investment Process: Excellent
Investment Resources: Excellent
Risk Management: Excellent
Investment Performance: Consistent
Company and Client Servicing: Excellent
Investment Process
Fitch considers IAM's investment process to be one of the most robust among Brazilian asset managers. The company manages a wide range of portfolios and strategies whose objectives are clearly stated. The investment process is well formalized and segmented by function, strategy and asset class. It has a robust structure of daily, weekly and monthly meetings and committees. The process focuses on fundamental analysis to generate strategic allocation, complemented by technical analysis for tactical positioning. Decision making is bolstered by robust research and quantitative support, performance monitoring methodologies are in place, and IAM exhibits sophisticated and well-resourced trading capabilities. The investment team is supported by a centralized trading area (except for the multimarket segment) that allows trading orders to be carried out efficiently, and fair allocation is ensured by automated procedures. The team uses sophisticated systems that perform pre-trading and order-management controls. There were no major changes in the investment process in the last year.
Investment Resources
Fitch views IAM as having a robust and well-resourced investment structure. The team is composed of highly experienced professionals at all levels, some of them with long tenure at the company. In the last year, IAM created the business development department and expanded its portfolio managers' staff to support growth. The CEO, who had been in the company since 2007, left the company for personal reasons and is expected to be replaced within a reasonably short time frame. IAM maintains clear separation of functions and benefits from support of its parent company. Under the
Fiduciary administration and custody activities are carried out by another business unit within the
Risk Management
IAM has an effective, highly structured, risk and governance framework supported by a robust and independent corporate structure. The risk and control structure is composed of the following departments: market and liquidity risk, credit risk, operational risk, internal controls and compliance. The monitoring and supervision committees, such as the risk and corporate audit committees, are established and held periodically. The asset manager is subject to multiple monitoring layers: administrator, custody, internal auditing of the IUH group and external auditing. IAM and the IUH group are also subject to supervision by Brazilian regulatory and self-regulatory bodies, such as CVM, Bacen and the
Investment Performance
Performance and risk indicators of most of IAM's strategies were in line with their objectives in the last 36 months. Fitch highlights that some of the asset manager's flagship funds posted performance risk adjusted in the first quintile over the analyzed period relative to peers, and the drawdown metrics were, in most cases, in line with or better than its peers.
Company and Client Servicing
With more than 60 years of experience, IAM is the second largest asset manager in
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to a positive rating action/upgrade:
The rating and scores cannot be upgraded as they are already at the highest level.
Factors that could, individually or collectively, lead to a negative rating action/downgrade:
IAM's rating could be sensitive to material adverse changes in any of the above-mentioned key rating drivers, including any potential weakening of its financial profile, high levels of key staff turnover, or deterioration in its processes and policies. An important deviation from Fitch's guidelines for any key factor may result in a rating downgrade.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
RATING ACTIONS
ENTITY/DEBT RATING PRIOR
Itau Asset Management IMQR Excellent Affirmed Excellent
VIEW ADDITIONAL RATING DETAILS
Additional information is available on www.fitchratings.com
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