Boletim de Fundos de Investimentos

Falling interest rates boost investment in balanced/mixed funds

The fund industry's performance in 2017 -- highlighting the R$4 trillion net equity and also record net capital inflow since the beginning of the historical series in 2002 -- mirrors the positive year for the sector. Net inflow up to November totaled R$231.9 billion, with the balanced/mixed and fixed-income classes standing out, raising R$91.7 billion and R$67.7 billion, respectively.

The significant drop in interest rates throughout the year has helped investments, especially in balanced/mixed funds, and allowed diversification in the allocation of resources. The net inflow of equity funds (R$10.1 billion through November), which had not occurred since 2013, is an example of this trend. The balance/mixed - macro and fixed-income-short duration/investment grade classes showed the best performance in the industry, raising R$30.9 million and R$25.9 billion, respectively.

However, November’s result was not in line with the positive trend seen throughout the year. Net outflow totaled R$20 billion, which to some extent confirms the seasonal movements of expected fund outflow in the second half. The fixed-income-free duration/investment grade and balanced/mixed - free funds saw negative net balance of R$5.6 billion and R$5.1 billion, respectively.


Still in November, return declined in most types of fixed income and balanced/mixed funds. This reduction was due to negative performance of medium and long-term securities in the period, which led the IMA-General, an index that reflects the mark-to-market government bond portfolio, to show a flat return (0.0%) in the month (Read here the Fixed Income Newsletter -- in Portuguese). But the monthly result does not compromise the year-to-date positive trajectory. The most representative types include the indexed-fixed income (11.34%) and balanced/mixed -- macro funds (12.59%). Returns are more significant among equity funds, especially equity -- value/growth, equity active index and equity -- free portfolio, which yielded year to date 23.84%, 21.91% and 21.81%, respectively.

Retail and high-income retail accounted for 63% of funding from fixed-income funds year to date, indicating the significant allocation of individuals’ resources to this class. Among balanced/mixed funds, the private segment accounted for 53% of the funding, but the portion corresponding to retail and high-income retail (11%) indicates a greater risk appetite in a context in which the Selic rate reaches a record low, while the search for return requires investors to diversify their portfolio profile.