(Recasts to give size and extent of redemptions, adds background throughout)
SAO PAULO, Nov 26 (Reuters) - Clients stepped up withdrawals from Grupo BTG Pactual SA's money management unit on Thursday, according to a source with knowledge of the bank's strategy, as Latin America's largest independent investment bank tries to contain fallout from the arrest of its top executive.
Outflows reached a cumulative 3.5 percent of assets under management over the past two days, the source said. Redemptions had hit around 1 percent on Wednesday, when Chief Executive Officer André Esteves was arrested on suspicion of obstructing a sweeping corruption investigation.
BTG Pactual oversees 230 billion reais ($61 billion) at its asset management unit.
The bank is using cash "conservatively" and has a wide array of easily tradable investments at hand to face client money outflows, the same source added, without elaborating.
Analysts have said redemptions at BTG Pactual pose no systemic risks for Brazil's banking system and noted the bank's robust liquidity and solvency indicators. Still, earlier in the day, Fitch Ratings put BTG Pactual's rating on review for a downgrade because of the uncertainty ensuing from Esteves' arrest.
Shares of BTG Pactual shed 2.9 percent on Thursday, on top of Wednesday's 21-percent plunge.
Earlier in the day, a Federal Supreme Court justice denied a lawyer request for the release of Esteves, and ordered he be transferred from a police station to a prison in Rio de Janeiro.
$1 = 3.7419 Brazilian reais Reporting by Guillermo Parra-Bernal; Editing by Marguerita Choy and Nick Zieminski