OREANDA-NEWS. Fitch Ratings has affirmed the International Scale Asset Manager Rating at 'High Standards' for RB Capital Asset Management Ltda. (RB Capital). The Rating Outlook is Stable.

KEY RATING DRIVERS
RB Capital's 'High Standards' rating reflects Fitch's opinion that the manager's investment platform and operating framework are strong relative to the standards applied by international institutional investors in global markets.

RB Capital's rating factors in its well-formalized and consistent practices in its investment process, its solid risk and compliance controls, and segregated activities relative to fiduciary administration and custody that are in line with the strong local market practices. The rating benefits from the good corporate framework of the RB Capital Group, and the parent investments in the asset manager.

The rating only applies to its domestic real estate fund activities and does not apply to its other business areas, such as the management of credit funds, fiduciary administration and custody, which have their own processes and policies.

In Fitch's opinion, RB Capital's key challenges are maintaining the consistent performance of its funds throughout the economic cycles in a challenging scenario for the Brazilian economy, preserve its reputation in the domestic real estate market and reduce its key-person risk.

RB Capital's 'High Standards' rating is based on the following assessments:

Company: Good
Controls: High
Investments: High
Operations: Good
Technology: High

Company
RB Capital Asset Management is an experienced asset manager, primarily focused on managing real estate funds and a business in credit funds. It is one of the main business units and fully owned subsidiary of RB Capital Holding, a company dedicated to the origination, structuring and distribution of investment products focused on the Brazilian real estate market.

The company's organizational structure is segregated from the other activities of the holding company, with good corporate governance and compliance policies. Despite being lean, RB Capital's control framework relies on well-established processes and highly qualified and experienced professionals. The asset manager's growth has been underpinned by investments, mainly in technology, with an aim at improving controls and operational processes.

During 2015, RB Capital's assets under management (AUM) reported an 11% growth, despite a challenging year for the Brazilian real estate market. This increase resulted mainly from an increase in investments allocated to the real estate market by two large institutional investors. The AUM profile is segmented into real estate funds (68%) and credit funds (32%). Investments in real estate funds follow three strategies: income (49%), real estate development (29%) and construction financing (22%). As of December 2015, its investor profile comprised corporate clients (44%), institutional (26%), private and retail (17%) and public entities (13%).

Controls
RB Capital relies on independent and well-organized corporate risk and compliance frameworks, with monthly committees following well-defined methodologies and guidelines. The risk and compliance areas report directly to one of the holding company's partners. The asset manager presents good operating risk controls, low operating losses and well-formalized and documented compliance policies and procedures, in addition to adequate policies and systems to control market risk and the liquidity of its funds.

The asset manager maintains strong practices in its daily monitoring of real estate projects, with detailed cash flow controls and robust processes to evaluate credit, execution, and liquidity risks. The funds have not reported relevant breaches in the last 12 months.

Investments
RB Capital's strong investment process relies on regular committees supported by sound financial, legal, environmental and market analyses for each project being well-formalized. The asset manager has an adequate framework, with 11 professionals dedicated to investments and the support from dedicated engineering, middle and back office areas. Although there is a key-personnel risk and company's managers have a strong influence on the decision-making process, this risk is mitigated by the partnership model adopted by the company and by the investment committees, which serve as a forum for knowledge exchange on new investment opportunities and for evaluation of the existing portfolio.

For each project, the investment process involves the following phases: origination of the deal; evaluation of the real estate developer, project and market; negotiation of the deal structure; investment committee; legal, financial and environmental due diligence; independent due diligence by third parties; ratification of the investment; and closing of the deal. Moreover, all funds have clearly defined concentration limits, eligible assets and structures defined in the term sheets. Some funds also include restrictions on tenant types. All mandates have clearly defined strategies (income, real estate development and construction financing), with proven adherence in monthly reports.

Operations
The fiduciary administration and custody activities are carried out by renowned institutions (being concentrated on BNY Mellon and Banco Bradesco). The processes comply with the regulations and are supported by sound technological platforms. The middle office area carries out the daily reconciliation of project cash flows and the monthly monitoring of each project's current stage of development, RB Capital's middle office area is responsible for validating all pricing information. The manager uses Viabil system (BDK Solutions) for real estate funds' control and Nave system (MAPS Solucoes e Servicos) for risk control, pre trading and NAV validation for credit funds.

Technology
RB Capital relies on sound management processes, and risk and back office controls, which in 2015 started to be carried out through two new systems. The asset manager invested in technology in recent years with an aim at increasing efficiency and to speed up its processes. RB Capital's systems allow for sound cash flow control, closer monitoring of the risk metrics of private credit funds (Nave) and real estate projects (Viabil). Contingency plans are well-structured, with backups available for all critical systems. The asset manager started to run formal tests on its business continuity plans in the second half of 2015.

Company Profile
RB Capital Asset Management, created in 2007, is an asset manager operating with the management of real estate and credit funds, with AUM of BRL3.1 billion in December 2015 (BRL2.1 billion in the real estate market).

RATING SENSITIVITIES
RB Capital Asset Management rating is sensitive to relevant adverse changes to any of the key drivers mentioned above, mainly a weakening of its financial profile, high professional turnover or deterioration of its processes and policies. Any important deviation from Fitch's guidelines for any key driver could also result in a rating downgrade.