Risk aversion led investors to migrate to income tax-exempt bank products, Anbima says


Pedro Rudge — Foto: Leo Pinheiro/Valor

Pedro Rudge — Foto: Leo Pinheiro/Valor

The mutual fund industry in Brazil had a negative net fundraising of R$205 billion in the first half of this year, said Anbima, the association of securities firms, showing the worst result for the period since records began, in 2002. According to Pedro Rudge, vice-president of the association, risk aversion during the period led investors to seek income tax-exempt bank products, such as real estate credit bills (LCIs), agricultural credit bills (LCAs), certificates of bank deposit (CDBs) and government bonds.

LCAs saw the largest increase in financial volume in the period, of 23.2%, followed by LCIs (22.9%) and government bonds (15.3%). The “newcomer” guaranteed real estate letter (LIG) began to attract the spotlight last year, especially amid rising interest rates in the country, and now grow 13.6% in the year. Used by banks to support real estate financing lines, they are income tax-exempt fixed-income securities (for individuals). Agribusiness receivables certificates (CRA) rose 13% and CDBs are up 10.3%.

In June, asset managers were expecting some recovery in fundraising, but this did not materialize and the figures worsened. Fixed-income funds reported a negative net fundraising of R$41 billion, while in May the loss had been R$22.3 billion. Equity funds, even with the recovery of the Brazilian stock market, had a negative balance of R$6.1 billion, while in May the figure had been negative at R$4.3 billion. And hedge funds had a negative result of R$9.5 billion, compared to a positive fundraising of R$447 million seen in May.

However, Mr. Rudge points out that even with this year’s redemptions, the industry still raised R$477.7 billion over the last five years. The total net assets of the funds grew to R$7.7 trillion in the first half of 2023, up 7.8% from the R$7.2 trillion reported a year before. And the number of accounts grew 12.3% to 35.5 million.

“This shows that investors are reallocating their assets rather than withdrawing from funds. And this movement can also be linked to the work of financial platforms and digital influencers, who have helped on the path of diversification by giving investors access to products and financial education to consume the most diverse products and build their portfolio according to their risk profile,” Mr. Rudge said.

For him, the improvement in the industry’s numbers is conditioned to the beginning of the cycle of interest rate cuts in Brazil. “The behavior and appetite of investors will be linked to the expectation of a decline in interest rates. The vote of the fiscal framework and tax overhaul in Congress and the cooling trend in inflation will increasingly solidify the view that the Central Bank will have the opportunity to lower the rate, which will increase confidence and lead to a greater risk appetite. This has already happened in recent weeks,” he said.

According to Mr. Rudge, as part of the preparations for the entry into force of Resolution 175 in October – which he said will be a “revolution in the structure of the industry” – Anbima is creating, at the request of the Brazilian Securities and Exchange Commission (CVM), a database of fund investments abroad, which he said will serve to increase the transparency of portfolios and allow the regulator to take “additional steps” in easing rules that will allow funds, including retail funds, to allocate up to 100% of their assets in other countries. Today, only funds aimed at qualified investors can allocate the entirety of their portfolio to foreign assets.

*Por Liane Thedim — Rio de Janeiro

Source: Valor International