The New York-based bank, which made the purchase through its hedge fund Highbridge Capital Management, did not disclose details of the transaction. But Brazilian media said it would pay about $270 million for a 55 percent stake and an option to buy the remaining 45 percent in the next five years.
Gavea is a mid-sized fund firm that is co-owned by former Brazilian central bank chief Arminio Fraga, one of the best-known names in the country’s bustling financial world.
Highbridge’s move follows other large international players such as Brevan Howard, Europe’s largest hedge fund firm, and Britain’s Man Group, which have launched Brazil-focused funds or started operating in the country.
“On the one side companies are looking at the economic growth in the country, the rising wealth for many Brazilians,” said Jorge Rodrigues, Latin America regional manager for Man Investments, the asset management division of Man Group. Man manages about $63 billion of assets.
“There is also an opportunity to offer a series of local products to its international clients and gaining Brazilian clients for its global products,” he added.
In a memo sent to employees late on Tuesday by asset management chief Mary Erdoes, JP Morgan said Gavea manages $6 billion in assets. Highbridge manages about $21 billion.
“Gavea will provide Highbridge with greater macroeconomic insight and direct exposure to investing in Brazil, which will be a powerful addition to our investment capabilities,” Highbridge Chief Executive Glenn Dubin said in a statement.
Under the terms of the deal, which was widely reported in Brazilian media in recent days, Fraga and six other Gavea executives will remain at the firm.
Both Fraga and his cousin Luiz Fraga, Gavea’s co-founder and co-chief investment officer of the private equity business, will also join Highbridge’s executive committee.
Fraga is also a member of JP Morgan’s international board.
A golf fanatic who earned his PhD from Princeton and worked with Stanley Druckenmiller while both managed funds for George Soros in the 1990s, Fraga took the helm of Brazil’s central bank in 1999 shortly after the country devalued its currency.
As soon as he took charge of the bank, Fraga boldly brought Brazil’s benchmark interest rate to 45 percent to prevent a massive devaluation of the real.
Fraga, 53, co-founded Gavea in 2003, bringing with him former central bank official Luis Fernando Figueiredo and former deputy finance minister Amaury Bier.
Gavea, based in the upscale Rio de Janeiro neighborhood Leblon, became well known for its private equity investments, buying stakes in failed airline BRA, McDonald’s franchises in Latin America, a chain of drugstores, shopping mall owner Aliansce and coffee producer Ipanema Coffees.
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