June 5, 2019 / 2:20 PM / 3 months ago

Brazil pension fund Previ to invest in upcoming share offerings

SAO PAULO, May 28 (Reuters) - Brazil’s largest pension fund Previ intends to be an active investor in a series of upcoming share offerings as part of an effort to diversify its portfolio, its Chief Executive Jose Mauricio Coelho told Reuters.

Brazilian companies such as Petrobras Distribuidora SA , software producer Linx SA, Banco BTG Pactual SA and utility CPFL Energia SA, among others, plan to sell shares over the next two months, as investors bet a pension reform will be approved by year-end, accelerating economic growth.

Previ, which manages the pensions of Brazil’s state-controlled lender Banco do Brasil SA and has nearly 200 billion reais ($51.80 billion) in assets, declined to name the companies it is targeting.

The fund intends to buy up to 10% of shares offered by companies individually, but not a stake higher than 2%, Coelho said.

More than 90% of Previ’s equity portfolio is concentrated in 12 companies, with almost 50% in miner Vale SA. Previ and other state companies’ pension funds collectively own about 20% of Vale through a holding company.

Marcus Moreira, Previ’s director of investments, said owning smaller stakes would give the pension fund greater flexibility to sell and buy stocks.

As part of its diversification plan, Previ will also sell part of a stake it holds in the power company Neoenergia SA in a initial public offering by July.

It has also sold some shares in Vale. In December, before a Vale dam burst in the town of Brumadinho killing over 240 people, Previ sold roughly 1.2 billion reais worth of stock in the mining company.

Coelho said the pension fund will seek a gradual sale of Vale shares going forward, avoiding dramatic moves.

The pension fund has also sought to reduce its exposure to equities to less than a third of its assets from nearly 50% by 2025, while increasing its fixed income portion, in a bid to ensure a more stable cash flow to pay retirees. It has more than 200,000 members.

Still, Moreira said it has been difficult to find fixed income assets paying interest rates that meet benefits targets, as Brazil’s benchmark interest rate is at 6.5%. Previ targets its performance at inflation plus 5.5% per year.

$1 = 3.8609 reais Reporting by Carolina Mandl; Editing by Bernadette Baum

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