Brazilian Asset Managers Scrap for Mandates

As Brazil’s pension fund industry takes off, independent managers find
it hard to wrestle assets from well entrenched retail banks. Most funds
pursue conservative mandates.

The Brazilian pension fund industry may have had a late start in life,
but it is already surprisingly large. The total in pension fund assets
is some 800 billion /reais/ ($441 billion) according to François
Racicot, principal at actuarial consultants Mercer in São Paulo.

It is the world’s eighth largest system by assets, adds Ricardo Pena,
director at the new regulator for closed funds, the Superintendência
Nacional de Previdência Complementar (Previc). Brazil has 500 billion
/reais/ in closed funds, he notes. The rate of growth of assets in 2009
was 14.1%, according to data from the Brazilian Association of Closed
Pension Fund Entities. Racicot believes that open funds could grow as
much as 20%-25% in coming years.

The closed sector, in which firms or industries sponsor separate
entities to manage funds for employees, accounts for some $280 billion,
Pena says. The fast-growing open sector, which offers a wide number of
plans that can be subscribed to by companies or individuals, has racked
up 300 billion /reais/ in assets under management, adds Racicot.

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