Taking advantage of higher interest rates that drove down prices for
fixed-income investments in Brazil, money managers at the world's
biggest bond fund are pouring more money into banks loans and credit
products, said Alec Kersman, head of Latin America and the Caribbean
at Pimco, as the firm is known.
"We are seeing a transition from core bonds to other strategies
within the firm — it's very exciting to see what clients are doing
and reacting to market evolution," Rio de Janeiro-based Kersman told
Trading Brazil, a Thomson Reuters' chatroom for market participants.
Some of the strategies currently implemented by Pimco in Brazil and
Latin America include adding bank loans, and hedging back the
duration component of some credit products, Kersman said, without
specifying. Pimco, which oversees about $1.9 trillion in assets, is
also eyeing potential purchases of Brazilian corporate bonds in the
wake of a spike in yields, he noted.
According to central bank data, investors poured a net $5.87 billion
into Brazil's local debt markets in the first two months of this
year, the largest inflow for the asset class since January 1995.
That came in the wake of rising borrowing costs for government debt;
yields on Brazilian government inflation-linked notes due in 2019
are now paying 6.38 percentage points above the inflation rate,
compared with 6.2 percent at the start of the year.
Pimco is scouring for buying opportunities in Brazil at a time where
confidence in Latin America's largest economy is at a multi-year
low. On Monday, ratings company Standard and Poor's trimmed the
sovereign debt rating of Brazil's government to "BBB minus," the
lowest investment-grade ranking, mainly because of a deterioration
in public finances.
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The S&P decision was vastly anticipated by market participants,
Kersman said. Asked whether Brazil's best moment is a thing of the
past, he said the country has a "great future ahead for itself" and
urged investors not to confuse cyclical dynamics with longer-term
Pimco has no plans to withdraw from Brazil, Kersman said, adding
that the fund needs to "be mindful of possible volatility and
scaling of investments."
In fact, money managers at Pimco are looking for companies that can
expand at a faster pace than gross domestic product in "a consistent
manner and that ideally are delivering," Kersman added.
(With additional reporting by Tiago Pariz in São Paulo;
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