FINVEST, through its various affiliates, focuses its efforts in 3 sectors of the alternative credit spectrum:
This is the area where the traditional banking system has been more exposed to disruption by alternative and technology-enabled challengers. Accordingly, FINVEST has established various direct lending operations focusing on individual consumers and SMBs.
In a country where credit has historically been overwhelmingly provided by banks, FINVEST has been a pioneer in exploring the regulatory disruption brought about by securitization. This is what occurred in Brazil after its economy stabilized with the Real Plan and new capital market instruments were introduced, including mortgage-backed securities (CRIs), agricultural asset-based securities (CRAs), collateralized loan obligations (FIDCs) and REITs.
As more players move into the alternative credit market, FINVEST believes that credit services (analytics, credit BI, risk analysis, payment system management, client onboarding, asset servicing and recovery, rating analysis, ...) will be in extremely high demand by the new entrants making credit support services the equivalent of the “pick and shovels” of the “credit rush”.
FINVEST mostly functions as a builder of the companies it invests in, providing capital and management as required. While preferring to hold controlling positions in its affiliates, FINVEST may sometimes raise additional capital by inviting like-minded co-investors to join in. In most cases, FINVEST´s partners continue to hold leadership and director positions in its companies.
FINVEST is in the alternative credit business on a permanent basis but may, eventually, sell certain credit affiliates as they mature or as long-term market and competitive conditions change over time. Such was the case with its credit and bond insurance company after the local reinsurance monopoly ended and Brazil began to attract much larger international insurers. Rather than becoming a mere broker, when approached by Swiss Re, already a close business partner, FINVEST decided to sell them its insurance affiliate. Or when the Brazilian government decided to relinquish fiscal prudence which, as expected, resulted in higher interest rates. This situation, already very hostile to capital markets, was further exacerbated by an irresponsible increase in lending by the public sectors banks. FINVEST then realized that the prospects for its debt capital markets affiliate, RB Capital, totally dependent on local funding, were rather dim and justified the sale of the company to a very large international player such as Japan’s Orix Corporation.