ADIC buys into Brazil finance house

The Abu Dhabi Investment Council has joined eight other international investors in buying a $1.8 billion stake in BTG Pactual, the finance firm owned by Brazilian billionaire Andre Esteves.

Abu Dhabi Investment Council (ADIC) is among nine investors putting US$1.8 billion (Dh6.61bn) into BTG Pactual, a Brazilian investment bank owned by the billionaire Andre Esteves.

ADIC, the investment arm of the Abu Dhabi Government, joined wealthy European and South American families and sovereign wealth funds in China and Singapore yesterday to take an 18 per cent stake in the company.

The stake reflects a move by major investors away from the developed world in favour of fast-growing emerging markets.

The IMF expects Brazil's economy to grow by 7.5 per cent this year, one of the highest rates in the world.

"Certainly this investment is a statement of confidence in the Brazilian economy," said Mr Esteves, the company's chief executive, Reuters reported.

ADIC could not be reached for comment.

Other sovereign funds based in Abu Dhabi have increased exposures to Brazil in recent years. Aabar Investments, a fund owned by the Government's International Petroleum Investment Company, bought $328 million of shares in the Brazilian arm of Spain's Banco Santander in October last year. The Abu Dhabi Investment Authority, the emirate's main sovereign fund, also invested last year in two towers in downtown Rio de Janeiro, complementing a large portfolio of Brazilian stocks and bonds.

Yesterday's BTG Pactual transaction values the company at $10bn and gives it new ammunition to keep growing. Pactual has been on an expansion kick since Mr Esteves's Banking and Trading Group (BTG) bought the business last year. In 2008, BTG also bought the Brazilian assets of Lehman Brothers, the failed US investment bank.

ADIC's partners in the investment include the China Investment Corporation, the Government of Singapore Investment Corporation, the Ontario Teachers' Pension Plan and JC Flowers, a New York buyout firm. They are putting in between $200m and $300m, according to a Financial Times report. A number of prominent families, including the Rothschilds, Italy's Agnellis and two families from Panama and Colombia, are also participating.

Victoria Barbary, an analyst at the Monitor Group in London, said that while Middle Eastern sovereign fund investments into Latin America were still coming at a trickle, the BTG Pactual play was evidence that government-owned vehicles were "waking up" to opportunities in the region.

"Two to three years ago the emerging markets that sovereign funds invested in were either in Asia Pacific - China, Indonesia and Singapore - or they were in the Middle East," she said. "We rarely saw them investing in anywhere else."

Since then, she said, funds had broadened investment targets to include India, Russia and now Brazil and the rest of Latin America.

"Basically, it's sovereign funds beginning to wake up to Latin America as a market," Ms Barbary said. "There's a perception that especially Brazil is a very strong market and that its growth base is much more diverse than the Middle East and probably negatively correlated to growth markets like China."

Mr Esteves said BTG Pactual had considered listing shares to finance its growth but had put off the plan because of poor market conditions, according to published reports. Even after the injection from ADIC and the other sovereign funds, though, he said the company might still go for a stock-market listing.