Investment booming in Brazil: Investment exposure up, tops in Latin American hedge funds
Brazil is making headlines. In the face of a highly contested presidential runoff and significant drought conditions in São Paulo, investment in Brazil continues to grow. International attention from the 2014 World Cup and upcoming 2016 Olympic Games are helping to fuel the flames, but there are a variety of other factors at play. There are nearly $1.8tn of assets in traditional institutional strategies with exposure to Brazil reporting to eVestment, a figure that has grown at a quarterly rate of over 7% since 2004 and over 8% since the financial crisis.
eVestment’s Brazil country report looks at major trends in the investment arena in this dynamic country. Here are some key findings.
1) Preferences for exposure to different Brazilian asset classes vary widely by investor types. Public funds account for a greater portion of Brazilian equity exposure vs. Brazilian fixed income. Sovereign wealth and insurance funds are the third and fourth largest investors in Brazilian fixed income, but account for a small fraction of exposure to Brazilian equities.
2) Accounts from Africa and the Middle East are among the larger investors in strategies with exposure to Brazil. While U.S.-based investors account for nearly 42% of assets in strategies with some exposure to Brazil, investors from Africa and the Middle East are the third largest, accounting for nearly 10%, having emerged as significant investors following the financial crisis.
3) Managers of Brazil-focused strategies may be best served targeting particular institutional investor domiciles and account types. Strategies with elevated exposure to Brazil had a higher proportion of assets come from investors domiciled in Europe as well as insurance, corporate and sovereign wealth funds compared to all strategies with some exposure to Brazil.
4) Latin America is home to a small percentage of the active hedge fund universe reporting to eVestment, however fund representation in Brazil is among the industry’s largest. Among all countries in the world, Brazil ranks 6th in the number of hedge funds operating within its borders. Within Latin America it is indisputably the most popular location, representing 82.56% of all hedge funds.