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FUND LAUNCHES: A fund furnace

FireBrazilian asset managers launched the equivalent of six funds a day in recent months. No wonder the country's industry is the biggest in Latin America. George Mitton reports.

Brazil’s fund management industry is, like its economy, the largest of the Latin American states. There were 1,150 funds launched into the Brazilian market in the six months ending March 31, according to data provider Morningstar. To give a sense of perspective, in the same period in the smaller Chilean market, there were just 29 fund launches.

But if the high level of activity in Brazil sounds surprising, consider that the country’s asset management industry is the sixth-biggest in the world. There are 400 firms registered with Brazil’s securities and exchange commission and between them they look after more than $900 billion.

The most prolific firm in the six months, in terms of fund launches, was BNY Mellon’s Brazilian subsidiary, BNY Mellon Serviços Financeiros, which launched 195 funds. The firm is the seventh-biggest in Brazil by assets under management, with BRL91 billion ($48 billion), according to Anbima, the Brazilian financial and capital markets association.

In second place, with 143 funds, was BTG Pactual Serviços Financeiros, the asset management unit of Brazilian investment bank BTG Pactual, which was created when BTG bought UBS Pactual in 2009. This firm is ninth-largest by assets, with BRL81 billion under management, according to Anbima.

In third, is Citibank’s Brazilian subsidiary, which launched 115 funds and is the tenth largest in terms of assets with BRL45 billion under management.

Itau Unibanco is fourth with 109 funds, if you include launches from its subsidiary Banco Itaucard. Itau Unibanco is the second-biggest asset manager in Brazil with BRL295 billion. Fifth is Bem, which launched 60 funds, and is the sixth-biggest by assets with BRL91 billion.

It may be significant that of the firms that were the most prolific fund launchers, only one, Itau Unibanco, is in the top five in terms of assets under management. It is likely that these companies hope, by releasing a high number of new products, to capture the inflows they need to push themselves up the rankings.

However, Brazil’s largest asset manager has been active, too. BB Gestão de Recursos, the fund management arm of state-owned Banco do Brasil, launched 35 funds in the six months to March 31. BB Gestão de Recursos has a strong lead in Brazil, with BRL408 billion in assets under management, more than BRL100 billion more than Itau Unibanco.

What kind of funds are selling well in Brazil? Data from Anbima shows that Brazilian investors like bonds. Fixed income products account for 30% of managed assets in the country while multi-asset funds, including balanced funds, account for 22%. Equity funds, in contrast, account for less than 10% of assets in Brazil.

Fund flow data suggests the preference for bonds is becoming more pronounced. Bond funds had nearly BRL40 billion of net inflows in 2010, far more than any other fund category and, in 2011, bond fund inflows rose to more than BRL50 billion, says Anbima.

It is also clear that Brazil’s industry is on an upward trend, as assets under management have doubled since 2006. With the exception of 2008, when the industry suffered outflows of about BRL60 billion, the country has had net inflows each year since 2006. In 2010, there were net inflows of about BRL120 billion.

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