BTG Pactual Stays on Top

The Brazilian firm holds onto its position as the buy-side’s favorite research provider in Institutional Investor’s 2019 Latin America Research Team.

Illustration by II

Illustration by II

While investors are still digesting the effects of Latin America’s historic 2018 election cycle, the votes are in for the region’s top equity research providers. This time — unlike the presidential elections in Brazil, Colombia, and Mexico — the incumbents prevailed.

BTG Pactual once again took the No. 1 spot in Institutional Investor’s 27th annual Latin America Research Team, based on the opinions of some 900 investment professionals across nearly 500 institutions that manage about $300 billion in Latin American equities.

The Brazil-based bank rose to the top of leaderboard last year after unseating JPMorgan Chase & Co. The American firm maintained second place in the team-based ranking, which combines votes for each firm’s individual analysts across the survey’s 22 industry sectors, countries, regions, and macroeconomic disciplines.

There was, however, some change further down the leaderboard: Bank of America Merrill Lynch, Bradesco BBI, and Citi all earned 14 team positions in a three-way tie for third place — improving on their respective fourth, seventh, and sixth place finishes in 2018. Itaú BBA, which took third place last year, did not actively participate in the survey this year.

Carlos Sequeira, head of research at BTG Pactual, said his team was able to fend off challengers due to the firm’s local nature — which he said helped it not only top the survey but flourish in a post-MiFID II world. The second Markets in Financial Instruments Directive separated trading from research dollars in January of last year.


“We were in a position, at the end of the day, that wasn’t much impacted,” he said of the directive. “It’s not that it didn’t change the way our clients are paying us, but it wasn’t bad for business. They can’t not pay. They have to make a decision and look at their research providers and decide which ones truly add value.

“Because of how specialized we are — and for investors who really care about Latin America — they pick someone specialized with resources in the region,” he continued. “In most cases, we were selected because we have a very strong research team.”

According to Sequeira, 24 of BTG Pactual’s 28 equity research analysts are locally based — a trend that extends to the firm’s credit and macro teams as well. “Having a local presence is going to continue to be our strategy,” he said.

This hypothesis was borne out by the 2019 Latin America Research Team survey when — in line with II’s other surveys — a new leaderboard was introduced based on the updated reality of research spending. BTG Pactual and JPMorgan tied for first place in the research team ranking when responses were weighted by commission ranges instead of each respondent’s level of assets under management.

Familiarity with the region will likely continue to be of the utmost importance as politics continue to dominate the domestic and global conversation. In addition to last year’s elections of presidents Jair Bolsonaro in Brazil, Iván Duque Márquez in Colombia, and Andrés Manuel López Obrador in Mexico, Chile’s President Sebastián Piñera completed his first year in December, and Argentina is slated to hold presidential elections in October.

The uncertainty of Argentinian elections may keep investors at bay — despite the fact that the country is expected to join index provider MSCI’s emerging market index this June — according to Pedro Martins, chief emerging markets equity strategist and head of LatAm equity research at JPMorgan.

“The macroeconomic and social policy agendas of new political leaders in LatAm represent big opportunities/risks for countries to produce a multi-year period of excess earnings growth compared with global equities,” he said. “The biggest challenge is to maintain relevance to global equities… And for that, the region needs higher potential GDP growth over longer horizons — tied to political cycles — and hopefully additional investable equity markets/countries in the region.”

Neither BTG Pactual or J.P. Morgan reported making any major changes to their research teams over the past year, but both cited increased collaboration across sectors and teams as key to producing quality equity research.

“We have been very focused on trying to produce unique research that goes deep into themes,” Sequeira said. “The teams really work together and people are willing to collaborate. We sit together; we debate together; and we make conclusions together. This fluid conversation and integration between teams is not that common.”