BTG Eyes New Hedge Fund Deals With Brazil Inflows Near Record

(Bloomberg) -- Banco BTG Pactual SA is considering additional stakes in Brazilian hedge fund firms as the nation’s fast-growing industry is flooded with inflows.

More deals could emerge similar to the bank’s agreement last month to become a minority partner at a new money manager, according to Eduardo Guardia, chief executive officer of BTG’s asset-management unit. That company will be set up by Itau Asset Management’s former CEO, Rubens Henriques.

“There’s room to continue with this initiative inside and outside Brazil,” Guardia, who was previously the nation’s finance minister, said in a video interview from BTG’s Sao Paulo office.

Brazil’s hedge fund industry has been expanding at a rapid pace in recent years, bucking a global trend away from those types of products, as investors search for yield amid record-low benchmark interest rates. Inflows at local hedge funds reached about 81 billion reais ($14 billion) this year through September, more than the total for last year and close to the 2017 record of 85 billion reais.

BTG’s asset-management business is also benefiting from new cash, with assets under management up 11% since the start of the year to 304 billion reais in June, according to regulatory filings. To cater to yield-hungry investors, the bank has been focusing on products such as private equity, infrastructure funds and even funds that invest in forests.

Read about BTG’s plans to add 1,000 workers this year

Guardia said that the country’s fiscal outlook will determine whether tailwinds endure for the industry. While President Jair Bolsonaro’s $107 billion relief program was seen as necessary to tackle the hit from the pandemic, the BTG executive flagged the importance of the government reaffirming its commitment to reforms and the maintenance of a spending-cap rule, which limits government’s expenditure increases to the previous year’s inflation rate.

“The spending cap is an anchor in terms of fiscal and economic policies,” Guardia said. “Our fiscal situation has deteriorated a lot and the margin of error is now much smaller.”

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