The domestic investor base in Brazil may be growing in leaps and bounds, but outside the country, too, scores of investors are keen on Brazil, and many wealth managers want to give their clients access to the investment opportunities there.
One of the most cost effective ways of accessing the Brazilian market is through ETFs, says Bruno del Ama, CEO of New York-based Global X Funds, which has developed a suite of ETFs especially for the local market in Brazil. The firm’s mid-cap ETF is particularly popular, del Ama says, because it offers investors the opportunity to invest in successful local companies that they might not necessarily come across in other investment vehicles that focus on Brazil.
“International ETFs typically feature only mega companies, which also happen to be global companies,” he says. “If you look at other Brazilian ETFs, they are very large and heavily concentrated in giant companies like Petrobras, the national oil company. Our products offer investors the chance to really play the local market and to participate in high quality companies at the local level.”
Global X Funds also offers a consumer sector ETF for Brazil as well as a Brazilian financial sector ETF, both of which are also very local in nature and have been received well by market participants in the United States. The company will be rolling more offerings out going forward and del Ama believes that they, too, will be greeted with enthusiasm because of the high level of interest in Brazil.
Brazil is certainly one of the most successful emerging market stories today and debt investors like Cristina Panait, co-portfolio manager of Los Angeles-based investment firm Payden & Rygel’s Emerging Market Bond Fund have been finding good opportunities there. While it was cheaper to buy Brazil at the beginning of the year, there continues to be a huge amount of both local currency and U.S. dollar issuance, and most deals still offer good value compared to U.S. companies in the same sectors, Panait says.
“We like the Brazil growth story so we have holdings in a number of sectors such as mining, steel and banking,” she says.
Panait has a positive outlook on Brazil in terms of economic growth, fiscal balance and debt dynamics. While some economists have cautioned about the dangers of overheating in Brazil, she believes that the Central Bank will be able to successfully employ the necessary tools to be able to control this efficiently and keep it in check.
“Overall, Brazil makes for a very positive growth story, well-balanced between domestic demand and exports,” she says.