Betting on Brazil

Terry Flanagan

Brazil, already one of the world’s largest economies, figures to grow even more as it takes advantage of its vast store of natural resources, and is therefore attracting its share of attention from institutional investors.

“We are seeing increased interest from investors in North America and Europe in our various funds,” said Russell Deakin, managing director at Rio Bravo Investments, which manages $4.8 billion, of which $3.3 billion is invested in commercial real estate, and the rest in various public and private equity vehicles.

“We have done a lot of REITs [real estate investment trusts], and are one of Brazil’s largest real estate developers,” said Deakin. “That sector has traditionally been the focus of domestic investors, but we believe international investors will also be attracted to our real estate funds.

Rio Bravo’s private equity funds, totaling $550 million, renewable energy, with a portfolio of 526 ,megawatts of wind projects under development, as well as a portfolio of 10 power plants totaling 166 megawatts of other renewable energy in advanced development.

Brazil is accelerating the development of power generation, particularly renewables such as as wind farms, small hydropower (SHP), thermal co-generation biomass, solar and, as well as conventional natural gas and coal.

These sources, taken together, give the country a diversification of energy sources and generation of regional decentralization, improving the reliability of the system as a whole.

“We have a positive view on the valuation of infrastructure assets, mainly in the sector of electric power generation in Brazil, with special attention to renewable energy,” Deakin said.

In public equity, Rio Bravo’s Fundamental fund is one of Brazil’s leading equity funds.

The fund seeks to work alongside the management, the board of directors and other minority shareholders of its invested companies in order to help improve operations, enhance corporate governance, and maximize share price.

“The Fundamental fund is public equity, but we are practicing a private equity-like strategy,” said Deakin. “It’s a very concentrated portfolio with 11 companies, and we sit on the boards of six. Before investing, we will investigate the company and its management, very similar to the approach we would take in private equity.”

The Fundamental fund has generated a net return of 750% since its inception in 2004, in comparison to the 280% return over the same period generated by the BM&F Bovespa, said Deakin.

Separately, Brazil-based Itaú, the largest bank in Latin America, has tapped Broadridge Financial Solutions to provide technology and business-process outsourcing to support its USD-based securities lending and repo business for its New York brokerage arm, Itaú BBA USA Securities, Inc.

The agreement enables Itaú BBA to leverage Broadridge’s Business Process Outsourcing (BPO) to create a single platform to manage its U.S.-based Prime Services operations, technology and hosting needs, as well as facilitate Itaú’s expansion into the USD-based securities financing and repo businesses.

“It is an exciting time for Itaú as we launch our USD-based securities lending and repo business,” said Gregory Wagner, managing director and global head of prime services at Itaú BBA, in a statement. “We are delighted to collaborate with Broadridge given their proven track record and industry-leading reputation, bundled technology and BPO offering, and domain expertise across securities lending and repo markets.”

According to Joseph Barra, President, International Securities Processing and Global Outsourcing Solutions, Broadridge, “Broadridge’s BPO model will allow Itaú to minimize its fixed-cost investment in technology and operational infrastructure while also creating new revenue-generating opportunities for the firm as it ramps up broker-dealer capabilities in the U.S. marketplace.”

Related articles

  1. Assessing Bond Liquidity
    Daily Email Feature

    Low Touch, High Liquidity

    Janus Henderson traders use a broad spectrum of electronic tools to optimize the search for liquidity.

  2. Florida CFO said ESG standards are being pushed by BlackRock for ideological reasons.

  3. Outlook 2016: Stephen Grainger, SWIFT

    The new regime requires a new investment playbook involving more frequent portfolio changes.

  4. Bats-Direct Edge Complete Merger

    DWS will hold a stake of 30% in the new company.

  5. More than 220 investors representing $30 trillion in AUM have signed up to 'Advance.'