SAO PAULO, Oct 21 (Reuters) - Investors are rushing into cross-asset funds in Brazil as the central bank cuts interest rates for the first time in four years, in a sign of growing confidence in Latin America’s biggest economy after years of risk aversion.
Many hope to capitalize on an expected pickup in economic activity following a deep rout, while lower rates threaten to erode yields of safer fixed-income investments.
Major asset managers have closed off their cross-asset funds - which may include assets like equities, bonds and currencies - to new entrants in the face of surging demand, while others have set up new investment vehicles.
São Paulo-based Garde Asset Management Gestão de Recursos Ltda restricted access to its flagship D‘Artagnan fund after net worth soared to 2.5 billion reais ($792 million) in September, more than triple the 800 million reais at the end of 2015.
“It was almost a technical stop due to growth being so high,” said Carlos Calabresi, chief investment officer at Garde.
Cross-asset funds offer investors a way to dip their toes in riskier markets while still holding a diversified portfolio.
This represents a sharp shift in strategy for investors in Brazil, many of whom have been sticking to safer sovereign bond funds as a deep recession took its toll on corporate profits.
Brazil’s cross-asset funds could post net inflows in 2016 for the first time since 2012, according to figures from industry group Anbima.
Banco Santander Brasil SA has already raised almost 1 billion reais with two cross-asset funds opened in May, said Christiano Ehlers, investment superintendent at the bank.
“Historically, cross-asset funds perform best when the outlook for financial markets is clear”, he said.
Brazil’s stocks, bonds and currency have rallied this year on hopes that President Michel Temer would turn the page on the interventionist policies pursued by his ousted predecessor Dilma Rousseff.
Many analysts expect the rebound in sentiment to translate into economic growth as soon as the fourth quarter.
Brazil’s gross domestic product contracted 3.9 percent last year, the biggest drop since 1990, though other recent figures suggest economic growth may have found a floor.
Slowing inflation could allow the central bank to cut rates even further, attracting more investors to cross-asset funds, said Marcelo Mendes, a manager at BBM Investimentos.
$1 = 3.15 reais Writing by Bruno Federowski; Editing by Bernadette Baum