Helping funds meet the needs of foreign investors
The Safdié family has a long tradition in the Latin American financial sector, having started out in the commercial banking business in Brazil 40 years ago.
Subsequently we went into private banking in Switzerland, where Banque Safdié is present in Geneva, Zurich and Lugano, and retail banking in New York. Over the years we have had distinguished partners in Dow Chemical, Swiss Bank Corporation and BNP.
While the bank is now focused on asset management and private banking, our historical role and expertise in Latin America means the region continues to represent an important part of our business. In particular, we have an asset management company in Brazil and we are seeding hedge fund managers there, because they can deliver the kind of levels of performance that are becoming hard to obtain in Europe and North America.
Our role is to help funds to structure themselves in a totally professional way in order to be able to market them outside the region. Our strength knows the Latin American market as well as the needs of investors outside the region, a combination that few if any of our competitors can match.
In choosing managers, we carry out due diligence, starting with quantitative screening - of as many as 200 managers in the case of Brazil - and then visit as many as 30 of them. When we seed a manager, we impose risk management rules and some other controls they must accept if we are to sign off on the project.
The hedge fund market in Latin America is quite new. Many of the principals are very good asset managers, but they don't know how to structure themselves or to sell themselves. Those are two areas in which we can add value. The aspect of corporate governance is crucial for investors from outside the region - performance is very important, but from our point of view governance is critical.
For funds that meet these criteria, demand from outside investors is growing. While many of the endowments and foundations that invest in hedge funds may be satisfied with returns of six or seven per cent a year, wealth managers that target returns of as much as 12 per cent are looking to funds that invest in emerging markets, including Asia and eastern Europe as well as Latin America.
Countries like Brazil used to have inflation of 50 per cent a month, but now inflation is coming down across the region and interest rates, currently around 20 per cent a year in Brazil, are following. Nevertheless, one of the positive legacies of hyperinflation is that it has helped to make people extremely sophisticated in managing money As interest rates fall and the attractions of placing funds in fixed-interest instruments declines, we are likely to see very substantial growth in Latin American hedge funds, spurred by an influx of foreign capital looking for superior performance with declining risk.
At the same time, we will see a shift away from global macro, fixed interest and multistrategy approaches towards areas such as long/short equity as the Latin American hedge fund industry matures.
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