Brazil’s Bradesco Asset Management (BRAM) has co-operated with FTSE Group in the UK to launch a Latin American equities fund that will track a newly developed equity index consisting of low-volatility, high-quality names from across the region.
The move comes as BRAM appointed a replacement for its high-profile chief executive, Joaquim Levy, who became finance minister in the new administration of Brazilian president Dilma Rousseff at the end of November.
The asset manager confirmed Reinaldo Le Grazie as its new chief, after his promotion from head of fixed income and hedge funds at the company.
The systematic, rules-based index, designed by FTSE with input from BRAM, will be the benchmark for a new Luxembourg SICAV called Bradesco Global Funds – FTSE Latin America Quality Value Equity.
It is weighted by low volatility, quality and relative valuation factors, each contributing equally, rather than by market capitalisation.
The universe for the index and fund will include almost 150 companies in Brazil (58% of the index), Chile (10%), Colombia (6%), Mexico (25%) and Peru (1%), as defined by FTSE’s market capitalisation indices for these five countries.
The valuation factor is based on a mix of price-to-equity, price-to-book and price-to-sales ratios, as well as cash flow and dividend yields.
Quality is determined by measuring factors such as profitability (in the form of return-on-equity), leverage (debt-to-assets) and operational efficiency (by measuring revenues against turnover of assets).
Axel Simonsen, who joined BRAM this year to head its new Systematic Products division, said: “The combination enables investors to tilt towards quality companies at reasonable valuations.
“The low-volatility factor helps investors to avoid some of the over-glamorous stocks in the universe.”
As it launches, the smart-beta index is tilted towards financials and utilities and away from consumer stocks.
This fund is BRAM’s seventh UCITS fund.
The company aims to grow its Systematic products division during 2015 and is currently considering the possibility of bringing to market a similar alternative beta fund for institutional Brazilian investors.
Luiz Osorio, BRAM’s head of international business development, said: “European investors are already familiarised with smart-beta methodologies.
“Local investors are starting to look into it but are not yet investing, and we have to see how these products work with local regulation.”
Le Grazie joined BRAM in 2011 as fixed income director after nearly three decades in financial services in Brazil.
Levy departs after joining BRAM as chief strategy officer in 2010 and became chief executive in 2012, after a career that took him from the IMF, through the Brazilian Ministry of Finance and the National Treasury, to the State of Rio de Janeiro.
Banco Bradesco established its asset management arm more than 40 years ago, before separating the business in 2001.
BRAM manages in excess of $150bn (€91bn), mostly in Brazilian and Latin American assets, for international investors and more than 100 public and private pension funds in Brazil.
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