Brazil Mutual Funds Seeing Strong Inflows

Net inflows into mutual funds in Brazil were stronger than expected in 2017, reaching a record BRL264 (US $80 billion) and led by multi-market demand, Moody’s Investors Service (MIS) says in a new report published February 28.

Retail and mainly high-net-worth individuals were largely responsible for the record flows, accounting for 60 percent, or BRL140.3 billion (USD42.4 billion), of flows in 2017. “We expect these investor types, which account for about a third of total assets under management, to continue to be the big drivers of net flows in 2018,” Moody’s senior analyst Diego Kashiwakura said.

Moody’s expects investors will continue to shift their asset mix away from fixed income towards higher-yielding asset classes, including multi-market, equities and alternative investments, such as private equity. Previdência funds will also likely gain market share, largely because of tax incentives that support investors’ demand for the two leading products in this segment, known as PGBL and VGBL.

Bank-affiliated investment managers, who have the largest share of fixed-income funds, will be more impacted by investors’ shift than independent asset management firms, says Moody’s. The agency also expects independent asset management firms to be net beneficiaries of this shift as Brazilian investors seeking better returns away from fixed-income and independent asset managers are better positioned to benefit from the trend.