Despite Bullish Dollar, Brazilians Invest in Assets Abroad

RIO DE JANEIRO, BRAZIL – In December last year, thousands of Brazilian investors made their first overseas investments. However, the purpose was not to diversify, but rather to take part in the initial offer of XP Investments shares, which decided to go public outside Brazil, on the Nasdaq American Stock Exchange.

The brokerage firm Avenue Securities, established to ease the direct investment of Brazilians in the American Stock Exchange, recorded the opening of 11,000 accounts that month – the best period until then. In May, into the Covid-19 pandemic, a new record was set: 24,000 new customers.

Despite the dollar’s surge eroding the value of the Brazilian currency this year, which impacts the future profitability of investments abroad, Brazilian investors began to diversify their portfolio with options outside the country, which was formerly centered on large investors. At Avenues, there are currently 100,000 accounts opened.

The number of quota holders of funds classified as “investment abroad”, according to data from the Brazilian Association of Financial and Capital Market Institutions (ANBIMA), is still modest: around 88,000 in March, 10,000 more than at the start of last year.

In Brazil, the funds that invest in the so-called BDRs (Brazilian Depositary Receipts, which are the receipts of shares traded in Brazil with backing in securities issued by foreign companies) can today only be acquired by qualified investors, those with over R$1 million (US$200,000) invested. However, the Brazilian Securities Commission (CVM) is in the process of changing the regulation and releasing the purchase of these securities by retail investors.

Avenue’s chief strategist, William Alves, comments that investments abroad have always been part of large investors’ portfolios, but it was not accessible to retail, a group of investors that has been growing in Brazil in times of low interest rates. “Now, the change is that individuals also want to have access to foreign markets due to the drop in interest rates.”

The drop in interest rates in Brazil, with the country now reaching the mark of zero real interest rates, has made the search for domestic investments with higher returns much more difficult, which has changed the Brazilian market dynamics, with savers reviewing their portfolios – often poorly diversified and with great exposure to fixed income, particularly in government bonds.

For those who prefer investing through funds in Brazil that invest abroad, the number of options is growing. Vitreo, for one, has launched a BDR fund of technology companies, such as American giants Amazon, Netflix, Facebook, Microsoft, and Google. In the first week, it raised R$20 million, from 1,600 individuals.

“To diversify, you need to have one foot out there and people are waking up to it,” says Vitreo founder and president Patrick O’Grady.

At Warren, investment funds abroad were among the fastest growing in May, in the wake of investors’ search for assets abroad. “By diversifying abroad, you mitigate the country’s risk,” says Igor Cavaca, the brokerage house’s equity analyst.

Source: O Estado de S. Paulo