Key data

Brazil’s investment management industry is made up of some 200 significant locally based fund managers, who managed over $328bn by December 2005 (93% of which was for third parties).  These included behalf of institutional clients (such as pension funds and insurers), high-net-worth, and ordinary retail clients, in vehicles ranging from mutual funds, to segregated portfolios.

The sector has grown in recent years because of the stabilization of Brazil’s economy since 1994, and the rapid increase in demand for financial products.

HIGHLIGHTS:

• The financial sector opened up to foreign competition in 1996, when foreign institutions were allowed 100% ownership of locally established firms. Since then there has been an influx of foreign fund managers aiming to participate in the growth in the market. Foreign participation in the industry is now about 25% (as a proportion of assets under management), and 28 of the top 80 fund managers have a significant degree of foreign ownership. The 20 largest fund managers in Brazil include international firms such as Citibank, BankBoston, CCF, ABN Amro, HSBC and Santander.
• The majority of investments (86%) held by fund managers are in fixed income investments rather than equity investments. This reflects the fact that local interest rates remain high (19.5% in December 2005) and the local currency has appreciated against the US$.

• compared to international levels while the local stock market has been very volatile, and has limited liquidity. 
• Money managed for institutional and retail investors is predominantly invested in Brazilian assets, because of legislation, the preferences of investors themselves, and the high costs of legally investing offshore.
• Insurers increasingly outsource the management of their assets, and a number of firms have become specialized in this field.
• The sector is becoming more professional. Independent custody is becoming the norm, and the quality of staff is improving. Transparency is also improving gradually, although the sector is still not as transparent as the US or the UK.  The mutual fund sector is beginning to see the separation of the role of the sponsor and portfolio manager.