Brazilian Asset Management Industry - Investment Analysis

This Frost & Sullivan research service titled Brazilian Asset Management Industry - Investment Analysis provides an overview of industry challenges, market drivers and restraints, investment themes, and growth monitor. In this research, Frost & Sullivan's expert analysts thoroughly examine the following: mutual funds, private equity, mergers and acquisitions.

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Market Overview

Burgeoning Middle Class Population and the Commodity Boom are Key to Growth in the Brazilian Asset Management Industry

The thriving middle class segment, economic attractiveness, and commodity boom are factors that have buoyed prospects for the Brazilian asset management industry. Brazil is poised to witness the one of the largest net increases in new investors within two years (2010-2011). Brazil is the tenth largest economy in the world. It has a robust financial system, and is among the top ten asset management industries in the world. Having won the bid for hosting the 2016 Olympics, Brazil will benefit from associated tourism as well as investments in infrastructure and other utilities. The 2014 FIFA World Cup and the 2016 Olympics are expected to contribute to nearly 3.0 percent of Brazil’s GDP in the coming years. Brazil has an abundance of natural resources, and the country is one of the emerging economies along with China, India, and Russia. "Brazil has a growing middle class segment that represents 51.6 percent of the total population," notes the analyst of this research service. "As a result, there is an increased domestic consumption demand, which protects the economy from external crisis." The industrial sector is competitive and diversified, and is able to generate economies of scale in various sectors. The Brazilian Government has actively encouraged foreign direct investment in the country by unleashing many tax-friendly regulations. Backed by investment-friendly regulations and governance, Brazil is set to become the fifth largest economy in the world by 2016.

Although the prospects for the market look upbeat, some impediments have reined in market progression. "Brazil had faced severe inflation risk and devaluation of currency during the recent economic crisis; however, the government was successful in controlling the inflation and keeping it low," says the analyst. "Brazil's improved external account position and stable financial system has helped maintain its investment grade status in the current financial crisis." There is a fall in investor confidence on the ability of portfolio managers to manage risks owing to the decline in capital markets due to the financial crisis.

Going forward, there is a pressing need to reduce the tax burden. Brazil funds its spending by levying higher taxes, and tax as a percent of GDP has increased from nearly 25.0 percent in 1990s to 36.0 percent in 2008. This strategy will be detrimental for the country in the long run. Besides, the time taken to file various taxes is very cumbersome. It is vital that the country establishes a medium-term framework. Various issues that Brazil needs to address in the next decade are currency appreciation, inflationary pressures, fiscal imbalance, exports, social security, and income and wealth disparities. Brazil’s attempts at increasing domestic consumption to boost the economy have met with success in the short term. To sustain the pace of economic growth in the future, private investment levels must be upped considerable notches.

Market Sectors

Expert Frost & Sullivan analysts thoroughly examine the following market sectors in this research:

• Mutual funds
• Private equity

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