Amid record global inflation and fears of a recession in the U.S., investors are taking a closer look at the markets of Latin America.
The relative attractiveness of the region’s equities has been building over the past 12 months due to two main factors, according to Dubravko Lakos-Bujas, head of global equity macro strategy and LatAm stock research at JPMorgan Chase & Co. The first is the “the phase-out of the exceptionally strong moment for U.S. equities following a massive price correction in growth stocks and the outperformance in the value sector. The second [is the] the positive impact of a trade shock, led by higher commodity prices.”
For the first three quarters of 2021, Latin America benefited from global market liquidity, but at the end of the year “things started to get a little more complicated,” according to Carlos Sequeira, head of research at BTG Pactual.
As inflation kicked in and equity markets dried up, investors began looking into opportunities around the globe, especially to countries that are commodity exporters like Brazil, Chile, Peru, and Colombia.
“This has attracted attention back to these countries, and we have pretty good inflows of money coming from international investors, especially into those countries,” Sequeira said, adding that Mexico is not experiencing this lift due to its lack of commodities and close ties to the U.S.
For insights like these, the buyside has once again selected BTG Pactual as the region’s top research team, according to Institutional Investor’s 30th annual Latin America Research Team survey.
Based on the opinions of more than 630 directors of research and investment professionals at asset management firms with significant securities holdings in Latin America, BTG Pactual broke its 2021 tie with JPMorgan to take pole position. The Latin American firm won by the slimmest of margins: Only one team position separated the winner and runner-up.
Third place went to BofA Securities, followed by Bradesco BBI and UBS in fourth and fifth, respectively. This main leaderboard was once again weighted by how much survey respondents paid in Latin America commissions.
Participants rated their top firms in each sector and then separately rated individual analysts, economists, and strategists at those firms to create two distinct rankings for each sector. In addition to these commission-weighted results, two leaderboards were created by weighting the responses by assets under management. BTG Pactual and JPMorgan shared the crown in AUM-weighted team ranking.
BTG Pactual’s Sequeira credits his firm’s ability to deliver top-notch research to the longevity and seniority of his 44-strong analyst team, which has had no major changes from 2021. The biggest change from last year, he said, is being back in all offices as well as back on the road. “For those that thought this would never happen again, it is happening,” he said.
“Our clients do appreciate it,” Sequeira added. “I just visited a few of our clients in the Midwest and for some of them I was the first Latin America analyst to do so.” His team has made recent trips to the U.S., Europe, and Asia, but it’s not a return to pre-pandemic levels. This is due not just to safety, but also the skyrocketing travel costs, and Sequeira believes all research firms will have to be more selective due to pressure on the sell side business.
At JPMorgan, Lakos-Bujas cited client service, operational excellence, and team culture as fundamental to the firm’s continued success.
“We continued to focus on delivering for our clients, despite a lot of moving parts around us,” he said. “We are devoted to building the best and most respected financial services franchise in the world, serving our clients and growing our communities globally.”
But to differentiate its offering in a crowded global and domestic field, a top research team must go further, Lakos-Bujas added.
“The starting point to innovation is to provide anticipatory, differentiated, value-added and accurate investment recommendations to our clients,” he said. “We help investors improve their return to risk on investments. We enable companies to dream big, access capital and grow their business. We strive to improve capital allocation and sustainable growth.”
In Latin America, JPMorgan has been focusing on delivering thematic research as well as structural and secular trends, unlocking new insights via alternative data, creating bespoke surveys to build differentiated content and proprietary datasets, collaborating globally and across assets, building a multi-platform approach to delivering research, and, lastly, ESG, “which is seeing exponential corporate and investor demand,” according to Lakos-Bujas.
BTG Pactual’s Sequeira confirmed the rising interest in environmental, social, and governance research. “Last year we started to see more demand for this type of research,” he said. He added that BTG Pactual has created a new ESG dedicated team that collaborates with the sector-specific analysts.
“We want to tell our investors what is happening in Latin America in that specific sector, for that specific industry concern,” he said. “And we have produced much more ESG research in 2021 than we had done in 2020 and I expect that trend to continue.”