As an unprecedented election cycle swept through Latin America, domestic firms shot up the ranks of Institutional Investor’s Latin America Sales Team.
Brazilian banks Itaú BBA and Bradesco BBI each moved up the leaderboard of the region’s best equity sales teams, with Itaú jumping from fifth place to first and ending the three-year reign of JPMorgan Chase & Co.
The ranking was determined by more than 500 buy-side analysts and money managers responsible for about $220 billion in Latin America equities. They rated salespeople based on eight relevant attributes, including communication, quality of idea generation, and proactivity in facilitating access to analysts.
“We have found that international investors increasingly look to the local banks in order to get the best and most up-to-date ‘on the ground’ information and interpretation of what is happening within the country,” said Rodrigo Magalhães, Itaú BBA’s global head of equities.
In addition to Itaú BBA’s first-place finish, São Paulo-based BTG Pactual repeated its second place performance, and Bradesco BBI improved from last year’s sixth place to No. 4.
Frederico Monnerat, head of U.S. sales at BTG Pactual, agreed that firms like his have an advantage during this eventful time for Latin American politics. The region is due to have 14 presidential elections over the two years ending in November 2019, according to the Brookings Institution.
“With all of these elections, we are able to provide the local angle given that we have offices in all of those countries,” Monnerat said.
Currently, the markets are going through what Monnerat describes as a “quiet period” of waiting for either a major election, such as Brazil’s in October, or for newly elected officials to make their agendas known. “From election results to the beginning of a mandate is such a long period that often loses momentum,” he added.
For now, investors are keeping tabs on negotiations between the U.S. and Mexico surrounding the North American Free Trade Agreement, as well as paying attention to outgoing Mexican president Enrique Peña Nieto, who is looking to make a deal before he leaves office on Dec. 1. “The NAFTA decision is definitely something the market will pay attention to,” said Monnerat, who predicts the decision could slip into next year.
In this current environment, Itau’s Magalhães said sell-side firms have a unique challenge and opportunity to partner with their clients. “The industry’s biggest challenges and opportunities are arguably the same,” he said. “Clients have become very specialized and information flows freely. [Our] challenge is to add value in an environment where competition has become fierce and quality trumps quantity. This is also the biggest opportunity since the broker that is able to establish itself as the reliable source of high-quality information reaps instant benefits.”
It’s a trend compounded by January’s revised Markets in Financial Instruments Directive, or MiFID II. The effects of the regulation’s unbundling of investment research and execution are still being digested by sell-side firms.
“Investors have become more discriminating in their consumption of resources and will partner with only those sell-side firms from which they derive value,” Magalhães said. “The key challenge is to establish your firm as an essential source of information with whom to partner.”
A good sales team, he added, relies on three pillars: reliability, communication, and organization.
As BTG Pactual’s Monnerat summed it up: “Salespeople need to listen more than they speak.”