Itaú Asset revamps fixed income division to boost capital inflows
Pedro Boainain, the new director of investments in credit, fixed income, and indexed Funds at Itaú Asset Management, is driving what he terms a "transformation" in the division. Assuming the role in March, he noted that "things were more stagnant than they should have been." Consequently, he is reevaluating the product lineup, and focusing on those more complex to leave behind the notion that fixed income is strictly a conservative investment. The idea, he said, is to be prepared for the next moves by investors, given the start of the downward cycle of interest rates in the country."In traditional fixed income, the one without credit risk, the industry lagged behind. It should be generating significant interest now but is instead repelling funds. It has been experiencing outflows for quite a while, excluding credit funds. It has been losing out to multi-market and CDB funds," he assessed.According to Mr. Boainain, whose department oversees R$500 billion of the total R$680 billion managed by Itaú Asset, investors grew accustomed to a fixed-income approach with low risk and low returns alongside multi-market funds. "A gap formed between these two things. So, we created products in the middle."He’s referring to the "unconstrained" fixed-income funds, which aim for returns through exposure to nominal interest rates, real rates, or price indices in Brazil and, in some cases, abroad. Itaú Asset allocates in countries like South Africa, Mexico, the United States, and Japan. Currencies come into play to hedge foreign interest rate exposures. There are five products whose goal is to outperform the CDI, managed by different teams. There is also a fund whose objective is to outperform inflation. Volatility, said Mr. Boainain, is between 2% and 3% a year, a level close to that of more conservative multimarkets.In pursuit of enhanced results, the asset manager reduced the administration fee for active fixed income to 0.9% annually and introduced a 20% performance fee for returns exceeding 100% of the interbank short-term rate (CDI). In the case of IPCA Action, the fee applies to gains beyond IPCA+ real rates. "Fixed income funds didn’t charge performance because it mainly didn’t make sense. Why charge for a product with modest performance?" he asked. "It’s a transformation brought about by various small things that will set us apart more distinctly in the industry."In the realm of private credit, the asset management launched the Itaú Action...
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