News Column

Fitch Affirms Viter's Int'l Scale Asset Mgr Rating at 'Highest Standards'

February 6, 2014

SAO PAULO & RIO DE JANEIRO--(BUSINESS WIRE)-- Fitch Ratings has affirmed the International Scale Asset Manager Rating at 'Highest Standards' for Viter - Vice-Presidencia de Gestao de Ativos de Terceiros da Caixa Economica Federal (Viter). The Rating Outlook remains Stable.

Key Rating Drivers

Viter's 'Highest Standards' rating reflects Fitch's opinion that the investment platform and operational structure of the manager are superior relative to the standards applied by institutional investors in international markets.

Viter's rating factors in that the manager is part of a solid financial conglomerate, Caixa Economica Federal (Caixa, Fitch IDR of 'BBB'/Outlook Stable). The rating also reflects the firm's quite conservative approach and broad client base and distribution channels, in addition to a well-disciplined investment process, concentrated on traditional fixed-income funds. The rating further considers its strong revenue generation, good technological structure and internal controls, besides the ample market risk and liquidity controls.

The rating of the manager only considers its activities in the local market, including the portfolio under management of free funds from the Unemployment Guarantee Fund (Fundo de Garantia por Tempo de Servico) (FGTS; BRL 132 billion) and excluding the management of structured funds (BRL 47 billion), such as credit rights investment funds (FIDCs) and private equity investment funds (FIPs). All these activities have their own processes and policies and are segregated from the management of traditional funds.

Viter's main challenges are the diversification into more sophisticated and higher value-added funds, such as those of credit and equities strategies, ongoing investments in tools and controls to sustain the growth of assets under management, and better performance of equities and multimarket funds.

The 'Highest Standards' rating is based on the following assessments:

Company: Highest

Controls: Highest

Investments: Highest

Operations: High

Technology: High

Company

Viter is part of a solid financial conglomerate, well-diversified and profitable. It is the fourth largest asset manager in Brazil, with a large experience in the fixed-income fund management segment, and contributes strong revenue generation for the group. The assets under management (AUM) have reported growth above that of the local industry, 26.9% of CAGR between 2008 and September 2013. This increase happened mainly as a result of funding from government entities and corporates. These segments gained relevance for the manager and, in that same period, increased their participation in AUM, from 3% to 18% and from 4% to 14%, respectively. Viter largely benefited from the strong relationship between the manager and institutional clients related to the government and from the implementation of areas specific to these segments.

The manager relies on a well-established corporate governance structure, segregated from the other activities of the group, which involves formal and disciplined committees. The processes are well-established, with qualified and experienced professionals.

Controls

The manager's risk culture is rather conservative, with several well-established market and liquidity risk limits and close supervision from its main executives. Funds' liquidity has been ample, benefiting from the high volume of federal securities. Breaches of limits have been low and promptly resolved.

Investments

Viter's investment process is well-established, based on committees with a top-down and sectorial approach, with a long-term view supported by risk area analyses. The manager's team is adequate and experienced, benefiting from the stability of its professionals, most of which have over 15 years in the market and with the group. Fixed-income fund performance has been good, having reached, in general, return targets in the last couple of years, whereas the equities have not reached its objectives.

Operations

Fiduciary and custody administration activities are mainly developed by the group, such as in other large asset managers linked to banks in Brazil. The funds' administration and custody activities rely on a good capacity and degree of automation, although there is space for improvements in process integration. Such processes observe regulations; conciliation and validation of funds' quotas are also carried out by the back office on a daily basis.

Technology

The manager relies on a solid technological platform, despite being in the process of implementing a new asset control system, which should improve the degree of automation and process velocity. The new system includes pre-trading verification with blockings and alerts and facilities to obtain management reports. Contingency plans are well-elaborated, with redundancy in all critical systems.

Company Profile

Created in 1998, Viter is responsible for Caixa's third-party asset management. It ranks as the fourth-largest manager in Brazil, with 7.2% market participation in the local market and AUM of BRL 169 billion, not taking into account the structured funds, according to the Brazilian Association of Financial and Capital Markets (Anbima), as of November 2013. Established in 1861, Caixa ranked as the third-largest bank in Brazil by assets as well as the second by deposits, as of September 2013, with BRL858 billion in assets and BRL 5 billion in income (BRL 6.1 billion in 2012). It is fully controlled by the federal government and its ratings reflect the high probability of support from the federal government, if necessary.

Rating Sensitivities

The rating of Vice-Presidencia de Gestao de Ativos de Terceiros da Caixa Economica Federal may be sensitive to significant adverse changes to any of the aforementioned rating drivers, mainly in case of a weakening of its financial profile, high professional turnover, or deterioration in its processes and policies. A material deviation from Fitch guidelines for any rating driver could lead to the rating being downgraded by Fitch.

For additional information on Fitch asset manager guidelines, please refer to the criteria referenced below, which can be found on Fitch's websites, at 'www.fitchratings.com' or 'www.fitchratings.com.br'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

-- 'Reviewing and Rating Asset Managers' (April 22, 2013).

Applicable Criteria and Related Research:

Reviewing and Rating Asset Managers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547947

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=819855

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Primary Analyst

Alexandre Yamashiro, CAIA

Director

+55-11-4504-2606

Fitch Ratings Brasil Ltda.

Alameda Santos, 700 - 7th floor - Cerqueira Cesar

Sao Paulo - SP - CEP: 01418-100

or

Secondary Analyst

Lucas Bender

Analyst

+55-11-4504-2217

or

Terciary Analyst

Pedro Gomes

Director

+55-11-4504-2604

or

Committee Chairperson

Davie R. Rodriguez, CFA

Senior Director

+1-212-908-0386

or

Media Relations:

Jaqueline Carvalho, Rio de Janeiro, +55 21 4503 2623

Email: jaqueline.carvalho@fitchratings.com

Elizabeth Fogerty, New York, +1 212-908-0526

Email: elizabeth.fogerty@fitchratings.com

Source: Fitch Ratings


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