Itaú’s international private bank has recently partnered with global consultant Mercer as the firm seeks to build out its alternative investment offering.
The offshore private banking unit for the Brazilian giant Itaú Unibanco has been looking to add hedge funds, private equity, private credit and real estate portfolios to its product line-up as Brazilian clients increasingly look for high income substitutes to cover what they used to receive from their country's high interest rates.
Brazil’s central bank has been easing its monetary policy since October 2016, most recently cutting rates to 8.25% in September.
‘A second quartile private equity firm would give you 14% or 15% returns through private equity. Clients were getting that risk-free until recently in Brazil,’ said Miami-based Roberto Martins (pictured below), head of global wealth solutions international for the bank.
He said to fill that gap, the firm is carefully looking for long-partnerships with a variety of funds, which is increasingly difficult with more than 6,000 funds currently raising capital around the world.
‘Other than increasing [expertise] internally we have created partnerships for the due diligence as well. We just signed a consultant contract with Mercer and they’re going to help us with our pipeline and due diligence,’ said Martins.
The firm’s due diligence will underpin Itaú’s own, Martins said, but the main reason it chose Mercer was its access to managers that are hard to invest with, soft closed funds or those that do not normally work with retail investors.
The firm also relies on information from data and research firms Albourne Partners and Prequin.
The firm’s fund selection unit in New York, powered by Itaú USA Asset Management, will slightly shift its focus to alternative investments from mutual fund selection, added Martins.
‘The focus in New York will be alternatives, traditional [fund selection] will still be done there but also more will be done in Brazil.’
Last week, Citywire Americas revealed the head of selection and alternative investment products Jeff Lombardi had left the firm. The firm has hired family office investor Pedro Barbosa to take on the role.
In May, the chief executive of Itaú USA Asset Management, Charles Ferraz, said the group was preparing to revamp the bank's allocation strategy on the back of declining interest rates in Brazil.
Looking at more traditional asset classes, Martins said the bank was seeing more demand for active funds from its clients.
‘Our clients are still believers in active management, you don’t see much [demand for passives]. We’re not experiencing what other industries see. We often hear clients say “if everyone is moving to passive I want to be the last active out because you can take advantage of that market.’’'