Fitch: No Impact on Funcef's Rating from Change in Senior Management
The pension fund for employees of the Caixa Economica Federal is being investigated (Operacao Greenfield) for certain investments made under its private equity processes, which follow separate and distinct policies and procedures than the liquid strategies and are not included in the scope of the rating. However, Fitch continues to monitor the impact of federal investigation on these private investments made by Funcef. Funcef, as well as some other major Brazilian pension funds, is being investigated by the Federal Prosecution Service and the Federal Police of Brazil due to some troubling private equity investments. The investigations aim to find any evidence of improper influence on Funcef's investment decisions with respect to these investments.
The investigation and the change in leadership in Brazil's federal government have prompted the fund's sponsor to appoint a new group of executives to be part of Funcef's executive board in early September. Carlos Antonio Vieira Fernandes was appointed as President of the institution (CEO), Paulo Cesar Werneck as Chief Investment Officer (CIO) and Renato Villela as Head of Private Equity and Real Estate Investments. The three executives have large experience in the Brazilian financial market and in the public service. Until now, the executives did not make any significant changes in staff or in the foundation's procedures, altered policies or investment guidelines. However it is expected that Funcef's new senior management will spearhead a review of its processes in order to improve them and strengthen the institution's corporate governance practices.
In Fitch's assessment, the change in senior management did not cause any relevant short-term impact in the investment process in liquid assets. However, Funcef's rating may be adversely impacted if the foundation is found guilty of any of the claims made by Operacao Greenfield, considering the harm that such an outcome may have on the manager's reputation. In addition, significant changes in the foundation's team or substantial changes to its processes could lead to a revision of Funcef's rating.
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