In December - 2002 the Brazilian funds industry had a total of R$ 344 billion in Assets Under Management - AUM, the same figure as at the end of 2001.
This was due to a net outflow of R$ 64.7 billion and an appreciation in value of the securities held by the funds of the same amount.
For the negative figure of the Net New Cash, the main reasons were:
-- A early than expected change in the MTM regulation, which made even money market funds to eventually show negative performance; that made investors to redeem and transfer money to savings accounts, perceived as a safe haven at that time; and
-- Abnormal market volatility caused by the Brazilian presidential election in October.
On the other hand, this volatility has pushed the Central Bank to keep a tight monetary policy, increasing the nominal base rate. As most of the Brazilian funds invest in floating rate debt securities, the return of funds' assets was not hurt. However, this scenario has kept investors away from equity funds, which represented only 8% of the industry.
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Table I
Investment Funds
AUM
Period In current Inconstant2 In US$ Number Exchange
R$ millions R$ millions millions3 of funds rate1
------------------------------------------------------------------------
1994 46,021.74 121,303.69 54,399.22 802 0.8460
1995 61,886.65 142,116.34 63,636.66 939 0.9725
1996 115,907.96 243,440.63 111,514.30 1,364 1.0394
1997 128,825.31 251,738.44 115,393.51 1,777 1.1164
1998 146,962.96 282,371.29 121,587.62 1,800 1.2087
1999 220,936.81 353,812.94 123,497.38 1,973 1.7890
2000 297,104.31 433,297.61 151,940.43 2, 304 1.9554
2001 344,413.38 455,031.24 148,428.45 2,524 2.3204
2002 344,483.05 360,035.51 97,496.12 2,817 3.5333
June 2003 408,946.93 408,946.93 142,390.99 2,773 2.8720
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1 In January 1999, Brazil has changed its exchange system and adopted floating rate regime
2 In constant currency of the last month, deflated by the IGP - General Price Index
3 Average of the month end open market rate
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Table 2
Funds of Funds
AUM
Period In current In constant4 In US$ % share Number
R$ millions R$ millions millions5 in the of funds
Total6
AUM
------------------------------------------------------------------------
1994 22.88 60.30 27.04 0.05 28
1995 15,455.85 35,492.78 15,892.91 24.97 235
1996 32,739.71 68,762.96 31,498.66 28.25 666
1997 48,791.71 95,344.21 43,704.50 37.87 837
1998 70,593.15 135,636.08 58,404.20 48.03 893
1999 112,631.00 180,369.700 62,957.52 50.98 1,101
2000 160,613.39 234,238.949 82,138.38 54.06 1,336
2001 189,407.09 250,240.39 81,626.91 54.99 1,512
2002 166,053.15 173,549.99 46,996.6174 48.20 1,607
June 2003 211,082.72 211,982.72 73,496.7693 51.62 1,736
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4 In constant currency of the last month, deflated by the IGP - General Price Index
5 Average of the month end open market rate.
The two segments that benefited from this environment were the Diversified Funds, which can more rapidly adapt their portfolio to market changes, and Pension Schemes Funds.
Pension Scheme Funds, which more than doubled their share in the total resources of funds in 2002, registered a net inflow of R$ 3.1 billion in the first semester of 2003.
Albeit the growth perspective for this segment remains high, it represents a mere 3.6% of the total industry.
For the whole industry, the figures for the first semester of 2003 show a much better scenario.
With the infusion of new cash, a net inflow of R$ 26.6 billion was recorded, which combined with a R$ 37.8 increase in the market value of the securities, raised the total AUM to the R$ 408.9 billion mark.
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Table 3
Data on Annual AUM -% Distribution per type
Fixed Money Pension Privati
Period Equity income Market Currency Diversified schemes zation Other
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1994 7.241 92.70 - - - - - 0.06
1995 2.77 83.45 - 0.37 13.24 - - 0.17
1996 3.89 83.55 - 1.22 11.18 - - 0.16
1997 11.22 79.90 - 0.79 7.82 - - 0.27
1998 8.53 56.43 27.62 0.82 6.01 0.10 - 0.51
1999 9.22 50.21 33.56 1.10 5.45 0.36 - 0.09
2000 7.28 55.20 30.46 1.19 4.16 0.78 0.84 0.10
2001 6.41 37.42 29.34 2.12 22.46 1.44 0.72 0.08
2002 7.84 33.97 25.41 1.73 26.64 2.98 1.33 0.10
June 03 6.69 35.23 25.32 1.57 26.57 3.59 0.97 0.06
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Note: In April, 2001 reclassification of funds took place.
The portfolio composition of the Fixed-Income Funds shows a concentration of investments in Government Securities in spite of the reduction registered between 2001 and 2002: from 71% to 62%, respectively, this reduction, however, was offset by the increasing share of repurchase agreements ("repos"), which are actually collateralized by Federal Bonds.
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Table 4
Portfolio composition of the fixed-income funds as% of the AUM7
Federal State and Other
Period Public Municipal CSDs Debentures Fixed Stock Repos Other
Bonds Public Bonds Income (Cash)
---------------------------------------------------------------------------------
1995 32.59 3.75 29.6 3.6 0.9 0.1 20.9 8.5
1996 38.01 3.18 13.1 2.8 1.0 0.2 33.7 8.3
1997 44.17 2.71 15.1 2.6 0.6 0.7 29.3 3 89
1998 70.42 2.4 8.8 1.8 1.1 0.80 11.2 4.55
1999 78.49 0.2 6.4 1.8 0.7 0.7 10.0 2.2
2000 73.89 0.7 5.2 2.7 0.3 0.0 13.1 3.2
2001 70.61 0.0 8.3 4.7 0.3 0.8 14.7 1.2
2002 61.99 0.1 6.6 4.9 0.3 0.8 23.4 2.1
June 03 66.62 0.1 8.4 4.36 0.6 0.90 17.8 1.3
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Source: Central Bank of Brazil
7 Not including the AUM of Equity Funds
The process of consolidating in the banking system has led to an increase in the industry concentration, as most of the fund were distributed through banks. During the year 2002, ten institutions were acquired or shut down their asset management unit, which lowered the number of managers to 110 in December. In 2001, the top 10 accounted for 72% of the AUM, but in 2002 their share grew only to 74%.
As for the 5 leading managers in 2002, they were responsible for over 53% of the AUM of the industry, versus 51% by the end of 2001.
This trend of consolidation is still continuing, whereas in the first semester of 2003 the number of administrators was reduced by 8 players, or 7%.
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Table 5
Number of Administrators and Concentration
% Concentration of the
Number of Variation AUM of the 10 leading % Concentration of
Administrators (%) administrators the AUM of the 5
Period leading administrators
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1993 175 - 58.1 39.8
1994 188 7.3 57.2 38.9
1995 172 (8.1) 66.1 46.12
1996 171 (0.8) 66.6 47.87
1997 158 (7.0) 64.3 45.35
1998 149 (5.0) 65.7 48.81
1999 133 (10.4) 67.0 47.24
2000 131 (1.0) 69.3 49.42
2001 120 (8.0) 72.3 51.4
2002 110 (8.33) 74.3 53.32
June 03 102 (7.27) 76.5 55.57
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Couresy: MUFAP
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