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Mutual funds: Brazil opens foreign markets to mutuals

Brazil plans to allow the country’s mutual funds, which have $525 billion in assets, to invest an unlimited proportion of their portfolios in overseas assets by the end of this year.

This year, Brazil’s equivalent of the SEC, the Comissão de Valores Mobiliários, issued new regulations (rules 450 and 456) that enable multi-market mutual funds to invest up to 20% of their portfolios in assets issued in countries it recognizes, and pure equity or fixed-income funds to invest up to 10% in the equivalent asset classes in those countries.

Brazilian mutual funds had to change their mandates by the end of August to take advantage of the new rules, and the industry expects some new products to be launched in September.

Carlos Sussekind, head of institutional investors’ regulation at CVM, says: "The next change will be to extend these new limits, ranging from 10% to 20%, to 100%. We are in the process of holding hearings on the subject now. I hope we can make the change by the year-end.

"What’s happening is an evolution. For a long time, Brazil had many economic problems and a weak currency. But then companies and individuals started to invest abroad.

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