BTG Pactual Rules Latam Research
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BTG Pactual Rules Latam Research

Banco BTG Pactual SA CEO Andres Esteves Spseaks At Foreign Policy Association Dinner
Andre Esteves, chief executive officer of Banco BTG Pactual SA, speaks at the Foreign Policy Association's annual Financial Services Dinner in New York, U.S., on Wednesday, Feb. 23, 2011. Esteves, the Brazilian billionaire who owns Banco BTG Pactual SA, postponed plans to take the investment bank public until next year after selling a stake for $1.8 billion in December. Photographer: Jin Lee/Bloomberg *** Local Caption *** Andre Esteves | Jin Lee/Bloomberg

Recent expansion has helped to fuel BTG Pactual's spectacular rise in Institutional Investor's Latin America Research Team.

BTG Pactual catapults from sixth place to claim the top spot on the 2012 Latin America Research Team, bringing an abrupt end to J.P. Morgan’s three-year domination of Institutional Investor’s annual survey of the region’s best sell-side analysts. The Brazil-based bank, which has been rapidly expanding throughout Latin America, captures 22 team positions, more than double the ten it won last year and four more than second-place Bank of America Merrill Lynch, which picks up three positions, for a total of 18.

J.P. Morgan tumbles to third place despite winning the same number of slots — 17 — as last year. It shares the No. 3 spot with Morgan Stanley, which in 2011 tied for second place with BofA Merrill. Morgan Stanley’s slip in the ranking belies its gain of two team positions. Itaú BBA holds firm in fifth place even though it, too, adds to its team-position total: Itaú wins 16 spots, up from 12. Survey results reflect the opinions of nearly 800 representatives of some 400 institutions and investment counseling firms, which collectively manage an estimated $397.7 billion in Latin American equities and $162 billion in Latin American debt.

BTG Pactual’s recent expansion has helped fuel its spectacular rise in the survey. In February the firm acquired Chilean rival Celfin Capital, and in June it announced plans to buy Bolsa y Renta, one of Colombia’s largest brokerages. These acquisitions further the company’s plans to become Latin America’s premier investment bank, according to Rodrigo Góes, who is not only BTG Pactual’s head of research, sales and trading, but also a highly regarded equity research analyst. This year he co-leads (with Renato Mimica) the teams that rank No. 1 in Transportation and No. 3 in Capital Goods.

“Celfin has added ten analysts to our roster and provided us with a physical presence in three new markets: Chile, Peru and Colombia, which makes a tremendous difference in offering proper research coverage,” says Góes, who is based in São Paulo. “Bolsa y Renta also has research capabilities and should further strengthen our product. Furthermore, we have made substantial investments in expanding our Mexican coverage.”

Last year at this time the firm employed 30 analysts tracking 153 stocks; now it has 42 researchers following 211 companies, with plans to raise that total to 250 in the year ahead, Góes adds.

BTG Pactual’s quest for market dominance is hardly going unchallenged, however. BofA Merrill has also been strengthening its presence in the region. One year ago it had 41 analysts publishing research on 217 equity and fixed-income offerings; these days its head count is down by one, but coverage has ballooned to 241 instruments.

“In 2011 we were primarily focused on broadening our stock coverage in the Andean region,” explains Brett Hodess, who in May replaced Stephen Haggerty as head of Americas research. (Haggerty now oversees coverage of Asia-Pacific.) “We plan to add approximately 20 to 25 stocks to our coverage by year-end 2012, with a focus on the Andean region, Mexico and high-growth sectors such as retail.” Both of these research directors believe that Latin American economies will continue to expand. “We expect 2013 growth at about the same speed as in 2012 — 2.7 percent — but this average masks divergent trends,” says Hodess, who works out of New York. Brazil will outperform the average, with real gross domestic product growth of 4.2 percent next year — more than double the 2 percent growth the firm forecasts for this year — as its economy benefits from looser monetary policy and a weaker real, he explains.

Góes agrees. “Brazil is likely to be the economy with the strongest pickup in growth rates between the two years — a natural reflection of a later-than-expected recovery in 2012,” he says. “There are obvious concerns about the global economic environment that Latin America will navigate — including the growth performance in China, the looming fiscal agenda in the U.S. and, most importantly, the evolving European crisis. Investors are aware that each country in Latin America has its own different exposure to each of these external risks, and that their own domestic circumstances also differ quite significantly.” Thus, portfolio managers are dependent on research that not only provides insight into financial trouble spots around the world and their effects on Latin America, but that also helps them find ways to make money in such a challenging environment.

“Investors have been correctly focused on macroeconomic and geopolitical uncertainties,” says Hodess. “At the same time, investors are asking for more help identifying stocks that have growth drivers that may not depend on these broader concerns. The search for alpha has never been greater.”

Read more in the September issue of Institutional Investor.

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