Is this the private equity cycle for Brazilian private banking?
Private bankers are eyeing PE and venture capital investments as digital platforms emerge in Brazil, but personal advisory remains critical.
Bankers in Brazil are betting that the country’s coming cycle of monetary loosening – kicked off by the central bank's 50 basis point cut in its headline Selic rate in August – will generate huge inflows into the private equity asset class by Brazilian private banking clients.
“Just as the previous cycle of monetary easing created huge investment flows from fixed income to equities by non-institutional investors, so we think this cycle will be about private investments such as private equity and venture capital for individual investors – led by private banking clients,” says Oscar Decotelli, chief executive of DXA Investments.
Data from the Brazilian stock exchange, B3, shows that between 2019 and 2023 the number of individuals investing in equities rose by 84%, to five million, as Brazilians sought new asset classes to boost returns as fixed income slumped alongside the Selic’s fall to 2% in 2020.
Decotelli claims the model 60-40 portfolio is “dead” because most of the alpha in financial markets now is created outside of the public markets, and that private clients will be searching for new asset classes – such as private equity, venture capital, natural resources, real estate and art – to generate better returns that also provide diversification and non-correlation to those traditional investment classes.