Bradesco Asset Management’s (BRAM) chief executive Joaquim Levy has recently given interviews to Brazilian magazine Epoca and the Financial Times where he made the bull case for Brazil on the back of low interest rates and infrastructure investments. He manages the third-largest asset management firm (after Banco do Brasil and Itaú-Unibanco) with R$265bn ($133bn) in assets under management. Currently, his firm has around 15% of its assets in equities and the rest in fixed income, largely in Brazilian government debt and investment grade credits. Below are some of his views…

On lower interest rates:

“… very beneficial, opening new possibilities for the economy and therefore for the Brazilian consumer. Lower interest rates, fiscal responsibility and a strong private sector are powerful ingredients to accelerate economic growth and offer more opportunities to people. Lower interest rates will also force investors to seek riskier alternatives and invest for the long term…. from our experience in the 2008 crisis, when interest rates fell the demand for equities increased.”

On Bolsa Familia:

“… With nearly 100 per cent of 15- to 16-year-olds attending school thanks to the Bolsa Familia, this is investment in human capital. It creates a middle-class. This is where the productivity will come from, and where the consumer demand will come from.”

On the impact of lower rates on the asset management industry and portfolio allocations:

“The portfolio changes will happen gradually. Previously [at higher rates], Brazilian investors were playing it safe and expected double-digit returns every year, but now they will start looking at other options and better understand the risks involved in different asset classes, which will be very good for the asset management industry.”

On how the “Brazil story” is still intact:

“They [investors] like the story [that Brazil is growing] and they like the process, the security, the infrastructure that goes with a big house…  it’s worth looking at the level of diversification you can get within the country – our infrastructure sector is the size of Mexico. We are mindful this is a long-term game.”

On infrastrucutre investment funds:

“Our infrastructure equity fund invests in publicly traded companies in the sector, and it has had a very good performance. The portfolio includes companies in the sectors of electricity, telecommunications, roads, construction, and oil and gas. These Brazilian companies together have a market cap greater than stock markets in Mexico, Turkey, Poland and Indonesia. These types of fund will perform very well in a scenario of low interest rates.”

On Brazil’s credit market:

“Fixed income has been king for a long time in Brazil, [but] the big change is people moving more and more to the credit market as interest rates drop… The environment is attractive to both issuers and investors. Companies are now looking to capital markets to fund them – that’s a good thing.”

On concerns related to China’s slowdown and its effect on commodities and Brazil:

“I would be more worried about what it means for global financial markets than about its effect on Brazil. Exports are just 10 per cent of Brazilian GDP, with commodities constituting only half of that… Brazil has a strong domestic market, which is more and more resilient because of increasing education.”

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