LatinFinance - May/June 2016 - 13

SCORECARD
BRAZIL

2015 was a tough year for Brazilian investors, but fund managers
still managed to deliver by focusing on quality and diversification.
By Rodrigo Amaral

Navigating the
headwinds

TESTING TIMES: Investments that drove
performance for Brazilian managers in 2015
will be hard to replicate this year as global
markets cool

Source: Reuters

focus on quality securities, currency plays and conservative approaches
has paid off for fund managers in Brazil as they face the country's worst recession in decades.
But some of the factors that drove performance in 2015, such as bets on the dollar and on
foreign equities, will be hard to replicate in 2016 given that global markets also cooled off in
the first quarter of the year.
The challenge to deliver performance is particularly relevant for funds that focus on riskier
assets, as Brazil's political and economic deterioration has spooked investors who are fleeing
investment funds in droves.
According to Anbima, an association of financial companies, the fund industry registered
424.4 billion reais in redemptions in 2015, compared to 411.3 billion reais of sales. Brazilian
hedge funds, known as multimercados, suffered the biggest hit, with redemptions surpassing
sales by 32.8 billion reais. Around 18.7 billion reais left equity funds, while fixed income ones
posted a net loss of 14.8 billion reais. A similar trend was observed in the first two months of
2016.
Investors are taking their money out of even the best performing funds. According to LatinFinance's 2016 Funds Scorecard Ranking, the Bradesco FIA Bdr Nivel I delivered returns of
over 125% in reais in the past three years. The Scorecard measures performance over one and three years to April 15, 2016,
based on data from Economatica. Bradesco's good showing,
however, did not stop redemptions overtaking sales by almost
190 million reais in 2015. In 2016, until mid-March, redemptions
reached 73.3 million reais, compared to 17.2 million reais worth
of sales.
According to analysts, Brazil's dire economy, which is projected to contract by more than 3% this year after shrinking by
3.8% in 2015, is driving investors to avoid risk as much as they
can. Add to that the country's chaotic political situation, and it is
not really surprising that a flight to safety is the main theme for
investors these days.
"Brazil is going through a perfect storm of political and economic conditions," said Lywal Salles, a board member at Vinci

Partners, an investment and advisory firm.
"As a result, 'doing nothing' has become an
option for many investors."
Sandra Petrovski, chief investment
officer at Votorantim Asset Management,
says investors are turning their attention to
"the good rates" offered by fixed income. "I
believe this will be the trend for the remainder of the year," she says.
Equity funds that have fared well have
strived to avoid the pitfalls of the Brazilian
economy by looking abroad or focusing on
quality over bargains.
For instance, the Bradesco FIA Bdr Nivel
I fund is 100% invested in Brazilian Depositary Receipts, BDRs, which are securities
sold in the São Paulo Stock Exchange by
foreign companies.

May/June 2016 - L ATINFINA NCE.COM 13

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