Brazil broadens its financial landscape
New entrants spur breadth and depth in the country’s capital markets.
At the end of 2023 there was a noticeable focus in Euromoney’s Brazilian banking coverage: startups. We talked to the new founders of BlueOak, Archx Capital and YvY, all firms that have been set up by very senior bankers, with long track records of success at established banks, but who are now betting on themselves.
None of this is new, of course. We have also recently talked to Ricardo Lacerda, who decided to found his own investment bank, BR Partners, 14 years ago, a venture that has grown through an IPO, a follow-on, and continues to prosper and is now adding a new wealth-management vertical to its investment-banking model.
The difference between the recent crop of startups and the previous vintage, however, is that whereas the former were essentially replicating business models – BR Partners is largely a smaller version of BTG Pactual, for example – these new firms are ploughing fresh financial furrows.
BlueOak is a distressed debt private equity fund and, while there are other companies operating in this sector, the specific strategy being pursued by its management team has no direct competitors.
Brazil’s debt capital markets now have a vibrant buy side that includes many new investment managers that actively trade in the secondary market
Archx is a new business model, too. By opening offices in every state capital and targeting the “emerging Brazilian companies” that traditional investment banks don’t reach, the advisory-led firm is bringing new services to a size of company that, while growing fast, hasn’t had the opportunity to access relationship banking services.
And YvY is opening a new global regulatory-driven investment theme regarding the region’s “climate winners” from the decarbonization trend.
Previous waves of independent financial boutique launches have played to the deepening of Brazil’s financial markets during the 2010s. This not only provided the space for these companies to launch, compete and grow, but these new firms themselves helped to strengthen the dynamic.
Brazil’s debt capital markets now have a vibrant buy side that includes many new investment managers that actively trade in the secondary market – not a characteristic of the country’s local markets 15 years ago.
Building on that foundation, this latest wave of startups is moving horizontally. The introduction of new investment products and strategies is leading to greater investment plurality. Not only does this engender greater financial markets breadth, but it also creates greater depth – adding different investment views and styles to create more diverse and efficient markets.
It also makes the markets more interesting, with new ideas offering investors greater choice and the ability to diversify away from portfolios dominated by traditional fixed-income assets. This ever-increasing pluralization of Brazil’s financial markets is good news for investors – and journalists – alike.