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Announcement: Moody's affirms Mongeral's MQ2 investment manager assessment
Global Credit Research - 15 Dec 2020
Sao Paulo, December 15, 2020 -- Moody's América Latina Ltda. has affirmed the investment manager quality assessment of MQ2 to Mongeral Aegon Investimentos Ltda (MAI). The MQ2 assessment reflects Moody's view of the asset manager as having very good management characteristics. MAI is a direct subsidiary of Mongeral Aegon Holding Ltda. (unrated), a well-established insurance group in Brazil.
MAI's MQ2 assessment reflects the company's disciplined investment process focused on long-term results, experienced team of professionals and the support, commitment and oversight of its direct parent, Mongeral Aegon Holding Ltda. (unrated), and ultimate parent, Aegon N.V. (A3, negative). The affirmation of MAI's MQ2 assessment is based on the company's very good risk and operational controls, consistent growth in Assets under Management (AUM) as well as solid and improved risk-adjusted performance of its funds.
Moody's notes that MAI continues to have very good investment management abilities, supported by strong operations, risk management procedures and controls as well as a good investment infrastructure. MAI follows a disciplined investment process that entails a combination of top-down and bottom-up analytical approaches that are supported by macroeconomic analysis and risk control. The investment process involves the analysis of the global and local macro and micro-economic environments and the definition of a base case and alternative scenarios. The strategies employed and the allocation of risk are established and validated by the investment committee rather than one manager, which, as a result, mitigates key-person risk exposure. Moody's noted that MAI also employs good risk management and control practices and procedures, and are also incorporated in the investment process.
With regard to MAI's investment performance, Moody's commented that the company's funds have shown solid risk-adjusted returns and have met their risk-return objectives. Importantly, this performance has improved over time on both an absolute and risk adjusted basis. The fixed-income and multimarket funds have generally outperformed local benchmarks although they have not consistently outperformed local peers. Moody's expects MAI's investment performance relative to local peers to improve going forward, given its very good investment management activities capabilities.
Moody's considers that MAI's financial flexibility has improved given the strong growth in its AUM since 2017 which have risen by more than 100%. However, the size of AUM is relatively small when compared to local peers rated at the MQ1 level and MAI's revenues and pre-tax income are modest. The company has however, expanded its employee base, reinforcing its compliance and back office team and will expand its operations to Sao Paulo, opening a second office with a dedicated commercial and client servicing team.
Moody's notes that the operational support provided from both Mongeral Aegon Holding Ltda., and by the ultimate parent, Aegon N.V. is a key consideration supporting the MQ2 assessment. The holding company has invested in technological infrastructure to expand the asset management business and Moody`s expect this to continue.
MAI's MQ2 assessment would face upward pressure if: 1) risk-adjusted investment results continue to improve over the next 12 to 18 months improved; and 2) total AUM continue strong growth over the same time. The MQ assessment would face downward pressure if: 1) the company's funds risk-adjusted performance deteriorates relative to both peers and benchmarks; 2) funds experience a substantial decrease in AUM; 3) there are significant deviations in the company's procedures that increase operational risk; or 4) decline in the degree of support from the parent company.
Headquartered in Rio de Janeiro, Brazil, Mongeral Aegon Investimentos was established in 2013 as the asset management division of Mongeral Aegon Holding Ltda. (unrated). As of June 2020, its total AUM amounted BRL6.2 billion (USD1.1 billion).
The methodology used in this rating was Investment Manager Quality Assessments of Asset Managers published in December 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1177533. Alternatively, please see the Rating Methodologies page on www.moodys.com.br for a copy of this methodology.
Please see www.moodys.com.br for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.
Farooq Khan Asst Vice President - Analyst Financial Institutions Group Moody's America Latina Ltda. Avenida Nacoes Unidas, 12.551 16th Floor, Room 1601 Sao Paulo, SP 04578-903 Brazil JOURNALISTS: 0 800 891 2518 Client Service: 1 212 553 1653 Marc R. Pinto, CFA MD - Financial Institutions Financial Institutions Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's America Latina Ltda. Avenida Nacoes Unidas, 12.551 16th Floor, Room 1601 Sao Paulo, SP 04578-903 Brazil JOURNALISTS: 0 800 891 2518 Client Service: 1 212 553 1653
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