EM Research Award for Latin America 2010: BTG Pactual

10/10/2010 |

In economies with structurally high interest rates, institutional investors tend to prefer bonds – and when they bet correctly on the direction of rates, they can strike gold.

BTG Pactual’s chief economist, Eduardo Loyo, and his team’s accurate calls on Brazilian central bank policy movements over the past year have comfortably beaten rival forecasts, and have in turn led to lucrative returns for clients.

In December, the Rio de Janeiro-based economists correctly predicted the Brazilian central bank would hold its benchmark Selic rate at 8.75% until April, when a 75bp hike would kick in. The team then forecast a maximum cumulative 150bp hike by October. As of mid-September, the Selic rate was up a further 125bp at 10.75%.

BTG Pactual’s prescient and assured predictions, at a time when markets were pricing in interest rate hikes in March, sets it apart from the crowd.

Asset management firm BTG Investments snapped up the Brazil operations of UBS last September, and BTG Pactual this year has bulked up its equity coverage even further.

WHAT INVESTORS WANT

No researcher accurately predicted both the severity of Mexico’s recession and its spirited recovery, with 4.5% growth estimated this year. In short, investors want: research that better stress tests Mexico’s business cycle and the factors that could shape its medium-term growth trajectory, including US domestic consumption patterns; more data on domestic pension funds’ investments in Brazilian and Mexican capital markets; and scenario-based research that gets to grip with the political and economic impact of the Brazilian presidential election.

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