Brazil – The run towards risky assets

As interest rates plunge in Brazil, investors are facing some tough decisions on how to reshape their portfolio strategies and look towards riskier allocations.

Previously, Brazilian investors were hooked on a gluttonous diet of sky-high interest rates, double digit yields and corporate bonds to fuel the basis of their investment dicestrategies but those days are long gone…

Investors are now looking towards hedge fund managers to invest in riskier assets, from corporate bonds to equities, to help bolster returns. This is proving to be a major topic of debate, with heavy weights such as Arminio Fraga from Gávea Investimentos in Rio de Janeiro stating that the “era of 6% plus real returns are behind us”.

But what does this actually mean for the market?

Unsurprisingly, there has been a lot of movement in the hedge fund market in Brazil, as new firms are opening up to take advantage of investor’s craving for diversity. As well as ‘in with the new’, existing managers are beefing up their equities teams and diversifying their product base to appeal to this new found investor appetite.

Like the rest of the market, however, I’m intrigued to see whether it will be more of a trickle than a flood of allocations into hedge funds in Brazil…Watch this space.

 

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