In a recent report, Fitch Ratings says that the results of its survey of Brazilian asset management 'front office' investment processes indicate that one size does not fit all for local asset managers, much like the results of a similar Fitch survey conducted of European asset managers. Fitch conducted a survey of 16 different investment processes, involving BRL920 billion in assets under management (AUM), which, according to the Brazilian Association of Financial and Capital Market Entities (Anbima), accounted for 36% of the market in December 2014. The objective of the agency was to identify whether the Brazilian managers adhere to the 'best practices' as outlined in Fitch's asset and fund manager rating criteria.
The survey covered the staffing of investment teams and their organization; research resources and degree of specialization/formalization of the processes; investment decision-making processes; and portfolio management and monitoring.
In terms of optimal size, 'best practice' means achieving the optimal fit between the task at hand - meeting (risk-adjusted) performance targets - and the resources available. This will vary by asset class and strategy, among other factors, as was confirmed by survey findings. Resources alone are insufficient: a rigorous investment process plays an equally important role. The survey conducted by Fitch in Brazil confirms that the local investment management sector is well aligned with global best practices.
