Brazil’s Pension Funds May Get Approval to Exit Fixed Income

June 19 (Bloomberg) — Brazilian pension funds that manage more than 425 billion reais ($215 billion) may be allowed to move all of their money out of fixed-income assets and into investments with higher potential returns such as stocks and private equity, the industry regulator said.

“The funds will have to prepare to take higher risks and to better assess the risks,” Ricardo Pena, Brazil’s 40-year-old pension fund secretary, said in an interview in Brasilia. “The scenario we see is one of inflation under control, economic growth and low interest rates. We need more adequate rules for this new scenario.”

Brazil’s National Monetary Council, a three-member group led by the finance minister, is considering the proposal, Pena said. A Finance Ministry spokeswoman said she couldn’t comment on when the council will vote on the proposal. The next meeting is scheduled for June 25.

“Our framework for pension funds and banks was built for an economy with interest rates of 20 percent and out-of-control inflation,” Zakalski said.

Annual inflation will slow to 4.39 percent this year from 5.9 percent in 2008, according to the median forecast in a June 12 central bank survey of economists. That compares with a peak of more than 6,800 percent in 1990.

Zakalski forecasts pension funds will boost investment in non-fixed-income assets to 50 percent over the next five years. Pena predicts that figure may reach 55 percent over that time.

Brazilian pension funds posted a loss of 1.6 percent in 2008, pulled down by a drop of 27 percent in variable return investments. Fixed-income investments gained 13 percent.

http://www.bloomberg.com/apps/news?pid=20601086&sid=aaIUDUJnSSSs

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categories Currency, Fixed Income/Bonds, General, Strategy/Allocation | | datetime June 19, 2009 9:18 am

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