The acquisition by UBS of a majority stake in Consenso, Brazil’s largest multi-family office, is a significant step in the Swiss bank’s growth strategy in the country.
Since 2010, UBS has been plotting its return in Brazil, following its sale of Pactual in 2009, and this transaction is the most notable since its acquisition of leading local brokerage Link – which was finalized in 2013 after UBS obtained a banking licence in 2012.
Consenso has R$20 billion in assets under management (AUM) – considerably more than UBS’s R$8 billion.
In the current climate, we think Brazil’s reform process will be delayed but not derailed- Alejandro Velez, UBS
The new wealth management operation will merge and be run by a combination of UBS management and Consenso founding partners, including Heinz Gruber, Luiz Borges, Maria Alice Gouvêa, Daniel Auerbach and Valéria Milani Pierini – who created the firm after leading Banco BBA Creditanstalt when that bank was bought by Itaú in 2002.
Consenso has offices in São Paulo, Rio de Janeiro, Curitiba and Belo Horizonte, and 60 employees. UBS says it has around 250 staff in Brazil. Deal pricing isn’t be revealed.
Alejandro Velez, UBS
Alejandro Velez, head of Latin America wealth management at UBS, tells Euromoney that the deal will “accelerate our expansion in Brazil”.
That expansion appears well timed: according to local banking organization Anbima, AUM of the wealth management industry increased by nearly 20% in the year to February 2017 to R$863 billion.
“We continue to believe in Brazil’s long-term prospects, as evidenced by this acquisition,” says Velez. “Brazil [is] a market that continues to be strategically important for us. Consenso has a strong track record with strong historic growth. It provides access to a large number of families in the high-net worth and upper-high net worth space.
“By combining Consenso local expertise and reputation with UBS’s standing and strengths, and maintaining the successful open platform strategy currently run by both firms in Brazil, we believe we can significantly enhance our value proposition and widen our appeal to a larger number of private clients in the country.”
Velez says UBS “continuously reviews” opportunities for further acquisitions and in 2013 Edinardo Figueiredo, then managing director of UBS, outlined to Euromoney UBS’s strategy for growing its wealth management business in Brazil.
“We want to grow through acquisition,” he said. “We are in talks with a lot of family offices in order to aggregate them in our operations, possibly to do acquisitions, but there are also some asset managers in the country that are open to work together.
“But the main idea is to grow through acquisition.”
Despite the current political uncertainty, Velez says he is positive about Brazil’s longer-term outlook.
“In the current climate, we think Brazil’s reform process will be delayed but not derailed,” he says and adds that the current easing cycle in Brazil – with the Brazilian central bank lowering the base rate to 10.25% from 11.25% at the previous meeting, is the key market issue for determining asset allocation strategies for clients.
“In our Brazilian tactical asset allocation, we hold an overweight position in hedge funds funded by an underweight in Brazilian floating rate bonds,” says Velez. “We believe that both local and global developments will provide fertile ground for volatility and hence opportunities for portfolio managers with well-established investment processes.
“Amid the ongoing interest-rate easing cycle in Brazil, floating rate bonds are less attractive in our view.”
The deal is a breakthrough for UBS in a competitive market: the local banks are strong – not least UBS’s former bank, now BTG Pactual – and fellow Swiss bank Credit Suisse will still dwarf UBS’s post-deal size in Brazil: Credit Suisse has AUM of R$95 billion and has had a strong presence in the market ever since it bought local private bank Garantia in 1998.
Meanwhile, fellow Swiss-based wealth manager Julius Baer has also been growing in Brazil and in March 2014 increased its participation in GPS Investimentos to 80%.
However, despite the strong international interest in the market, the recent consolidation in the wealth management segment – when Citi sold its banking franchise to Itaú and HSBC sold to Bradesco – has lowered the number of international banks with significant Brazilian operations.
According to Santander, this has been an opportunity for wealthy clients seeking to diversify internationally with a foreign bank.
What is Velez’s advice for Brazilians seeking to diversify their asset portfolios outside of Brazil?
“We have an overweight position in global equities relative to high-grade bonds,” he says. “Fading political risks in Europe and solid global earnings trends should continue to benefit our risk-on stance.
“Within Europe, we are overweight eurozone equities relative to UK equities. UK earnings are likely to come under pressure due to a stronger pound and falling commodity prices, while investors are likely to give the eurozone more credit for its ongoing economic growth now that the French presidential election has passed.”
Velez adds: “In currencies, we retain our preference for the euro versus the US dollar, given the current undervaluation of the euro, the eurozone’s economic catch-up potential, and differences in monetary policy and investor positioning.”