19 de octubre de 2015 / 17:33 / en 2 años

Brazil infrastructure plans may struggle as funds cut risk-taking

SAO PAULO, Oct 19 (Reuters) - With Brazilian interest rates at a nine-year high, pension funds are not inclined to participate in infrastructure investment programs that the government hoped would revive an economy hobbled with its worst slump in a quarter century.

Compelled to take on less risk after three years of dismal performance that triggered significant losses, pension funds are snapping up more government debt at the expense of equities and alternative, less-liquid investments, executives say.

“We are taking on less market and credit risk these days,” said Lício de Costa Raimundo, chief investment officer of Petros, the fund overseeing the savings of state-controlled oil producer Petróleo Brasileiro SA’s workers. “The trend is to focus on more government debt purchases.”

The favorite instrument is so-called NTN-Bs, or government inflation-linked notes that pay yields of over 7 percentage-points on top of trailing, 12-month inflation of about 9.5 percent, the executives note.

The share of government debt in pension funds’ investment portfolios rose to 66 percent at the end of June from 60 percent in December 2013, according to industry group Abrapp.

Their share of so-called structured investments, stakes in infrastructure such as road, sanitation and airport projects, is rapidly falling from 3.3 percent in December to about 3 percent in June. Fund managers expect that share to decline further in the remainder of this year.

Previ, Petros and Funcef, Brazil’s top-three pension funds, are pulling out more rapidly than others, dealing a blow to President Dilma Rousseff’s attempt to make infrastructure the engine of the nation’s economic recovery. Combined, the three funds - which are owned by workers of three giant state firms - oversee 40 percent of the 733 billion reais ($188 billion) that the industry oversees in retirement money.

Their tack underscores the juggling act facing Rousseff: keeping interest rates high to control inflation and rebuild investor confidence or cutting rates to speed up recovery. Pressure is mounting on her to jumpstart an economy that is slated to shrink this and next year, the first back-to-back annual contractions since the 1930s.

Currently, returns on rights to operate ports and airports for 20 years pay no more than 10 percent, compared with risk-free government yields close to 8 percent for the same time frame.

“Before, we would step in on an infrastructure project grabbing 20 percent to 25 percent of the total investment. Now we don’t even go for 10 percent,” said Maurício Marcellini Pereira, CIO at Funcef, which oversees worker retirement funds for state-controlled lender Caixa Econômica Federal.

$1 = 3.8964 Brazilian reais Reporting by Guillermo Parra-Bernal; Editing by Dan Grebler

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