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Brazil asset managers have worst fundraising year since 2007

Asset managers in Brazil raised the lowest amount of money from investors in the first nine months since at least 2007, a sign that the impact of this month's presidential election, high borrowing costs and global market turmoil are spooking market participants.

Pension funds, asset management firms and other specialized money managers raised a net 31.37 billion reais ($13.1 billion) from investors in the January-through-September period, Anbima, the group that represents funds and investment banks in the country, said on Tuesday. The number is half the average net fundraising of 61 billion reais for the period since 2007.

The industry garnered 86.7 billion reais in the year-earlier period, Anbima said.

The data underscore a trend seen since late last year, with clients reluctant to pour money into asset management and hedge funds, given the outlook. Yet, a strong recovery was witnessed in the third quarter from the prior three months, with net fundraising jumping to 21.4 billion reais from 7.2 billion reais as demand soared for more liquid, less risky instruments.

Investors have turned heavily critical of President Dilma Rousseff's heavy-handed intervention in some industries and her reluctance to tackle growing imbalances on the fiscal and external fronts. Rousseff is leading opinion polls and would defeat opposition candidate Aécio Neves, a favorite of investors, in a runoff scheduled for Oct. 26.

Among client segments, pension funds, private retirement fund companies as well as retail investors were the only ones that funneled money in to money managers in the first nine months, Anbima said. In contrast, private banking, corporate clients, foreign investors and pension funds cut exposure to Brazilian markets via funds.

"Investors kept flying towards short-term instruments to remain highly liquid," Carlos Massaru, a senior executive at state-run Banco do Brasil SA's asset management division BB DTVM, told reporters on a conference call. "Equities are recovering, but for reasons not linked to fundamentals."

The numbers also provide fresh evidence of the impact on investor perceptions of declining monetary stimulus in the United States and a deterioration in Brazil's fiscal position.

Brazil has the world's seventh-largest fund industry, with $1.14 trillion of assets under management.

($1 = 2.4025 Brazilian reais)

[Source: By Guillermo Parra-Bernal, Reuters, Sao Paulo, 07Oct14]

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