Phil Davis – The Financial Times, 07/01/2012
It is not obvious why fund managers are attracted to a market where there is little equity culture, minimal demand for international assets and a bank-dominated distribution market. And yet investment firms are flocking to register funds in Brazil. Over 400 – mainly domestic, but increasingly global – fund managers are now registered with the local funds association.
The attraction, clearly, is more about potential than current opportunities. Like many Latin American countries, Brazil has a young and rising population with a fast-growing middle class. As Christoph Hofmann, global head of distribution at Ashmore Investment Management, notes: “People are evolving from a situation where they can’t feed their families to having significant amounts of discretionary income. And because people have grown up without government safety nets, the savings rate is high.”
These savings are starting to be put to work: assets under management in Brazil have grown at a compound annual rate of 19 per cent over the past 15 years, and even faster over the past three years. The trouble is, from an international investment firm’s viewpoint, the vast majority of these assets are invested in domestic bonds.