Fitch Assigns BancoEstado Administradora General de Fondos Asset Manager Rating of 'High Standards'

SANTIAGO, Chile--(BUSINESS WIRE)-- Fitch Ratings has assigned an International Asset Manager Rating of 'High Standards' to BancoEstado S.A. Administradora General de Fondos (BancoEstado AGF). The Rating Outlook is Stable.

KEY RATING DRIVERS

The 'High Standards' rating assigned to BancoEstado AGF reflects Fitch's opinion that the company's investment platform and operating framework are strong relative to the standards applied by international institutional investors.

BancoEstado AGF's rating considers a well-established and disciplined investment process, strong control and governance structures, as well as a solid operational and technological support. The rating also takes in consideration its experienced executive team, the firm's financial stability and the benefits of being part of BNP Paribas Investment Partners ('Highest Standard'/Outlook Stable) and Banco del Estado de Chile ('A+'/Outlook Stable/'F1').

In Fitch's opinion, BancoEstado AGF's main challenges include a continued effort to achieve more diversification in its product mix, along with strengthening of an internal research area, providing the asset manager with a strong knowledge across different asset classes. Fitch also sees an opportunity to broaden its client base, mainly with overseas and institutional investors, as well as improve the ability and flexibility to generate customized mandates to meet the needs of different investors.

The 'High Standards' rating is based on the following category assessments:

Company: Highest

Controls: Highest

Investments: High

Operations: High

Technology: High

Company

With 19 years' experience, BancoEstado AGF is a joint venture between Banco Estado and BNP Paribas Investment Partners (BNPP IP), the asset management arm of BNP Paribas banking group ('A+'/Outlook Stable/'F1'). BEAGF is a highly experienced in the local market and offers a product mix that is composed mainly of debt funds which represent 99% of AuM. BEAGF net profits represent a small percentage of BancoEstado net income (5.1% at end-December 2015), however, the asset manager is a core business unit integrated to the group, maintaining robust control environment and adequate corporate governance practices. The company has a well-defined organizational structure, clear roles and responsibilities, with an experienced and qualified executive staff, including second layer.

Controls

BEAGF's risk and compliance management relies on a strong and independent structure, following the global methodologies and guidelines of BNP IP and BancoEstado. The risk and compliance team comprises very experienced professionals, suitable for the current number of funds and strategies. BEAGF presents solid operating risk controls, with very low operating losses in the last 36 months, well-formalized and documented compliance policies and strong procedures on market risk, credit risk and liquidity control. The company maintains automated pre and post-trading compliance controls, monitored by the Asset Arena system.

Investments

BEAGF maintains a well-established and disciplined investment process, based on regular committees driven by a top-down view, with bottom-up analysis and quantitative research. The investment process is well-formalized and segmented with qualified and experienced investment professionals, and with broad access to market information, based on in-depth research by an external provider. There is strong monitoring of investment performance by formal committees, including performance attribution and daily performance review of all funds.

Operations

The operational resources of middle and back office are consistent with the volume of assets under management, following standardized practices through automated processes. The Operations Management area is highly experienced with a low turnover and appropriate segregation in their roles. BEAGF maintains scalable and secured procedures, supported by solid technological platform, with good process automation with only a few manual interventions and offer an advanced degree of quality control. NAV calculations and validations are performed daily by the middle office area, with very limited administrative burden on PMs. Frequent standardized communication with clients and maintaining clear policies and procedures for the launch of new products.

Technology

IT Resources are coherent with AuM and can support a higher level of activity, benefited by the Bank's corporate structure. The technological platform is robust, largely built around third-party vendors, based in the core front-office application for portfolio management and order management applications 'Asset Arena' and the BAC system for the administration of funds. Systems are highly integrated, including third parties, with a centralized module for position record keeping, maintaining a high degree of automated procedures. Strong risk platform, carried out through risk matrices directed by risk Area and running continuing process for all funds. Standardized contingency plans with robust IT security guidelines and policies.

Company Profile

Established in 1997, since 2008 BancoEstado AGF is a joint venture between Banco Estado and BNP Paribas Investment Partners. Specialized in mutual funds, at end-March 2016, BancoEstado AGF managed USD3 billion, concentrated in bond and money market funds.

RATING SENSITIVITIES

The rating may be sensitive to material adverse changes to any of the aforementioned rating drivers, notably through weakened financial conditions, heightened staff turnover or deterioration of processes and policies. A material deviation from Fitch's guidelines for any key rating driver could cause the rating to be downgraded.

Additional information is available on www.fitchratings.com

Applicable Criteria

Asset Manager Rating Criteria (pub. 06 May 2014)

Applicable Criteria

Asset Manager Rating Criteria (pub. 06 May 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=747701

Additional Disclosures

Solicitation Statushttps://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1008004

Endorsement Policyhttps://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Fitch Ratings
Primary Analyst
Gonzalo Alliende, +562-2499-3308
Senior Director
Fitch Chile Clasificadora de Riesgo Ltda.
Alcantara 200, Of. 202, Las Condes
Santiago, Chile
or
Secondary Analyst
Mauricio Albornoz, +562-2499-3326
Associate Director
or
Committee Chairperson
Davie R. Rodriguez, CFA, +1-212-908-0386
Senior Director
or
Media Relations, New York
Elizabeth Fogerty, +1-212-908-0526
[email protected]

Source: Fitch Ratings

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