Brazilian Funds Research Articles

Portfolio turnover and performance of equity investment funds in Brazil

ABSTRACT The purpose of this paper was to analyze the relationships between the portfolio turnover and performance of equity investment funds in Brazil. There are few published studies on the subject, but the previously identified Brazilian studies that have examined making changes to portfolios have been limited to very restricted data samples and have only worked with an ordinary least squares (OLS) model without taking into account the indications of international studies and economic theory itself of the possible endogeneity of turnover, which would make OLS estimation inadequate. The expressive growth of the fund industry in the Brazilian market shows the relevance of the object of research. Two portfolio turnover metrics were analyzed: one based on changes in the monetary values of the assets and another based on changing the weights of the assets in the portfolio. The estimations were performed for fixed effects panel data and then for a two-stage least squares model, using instrumental variables. The funds that make up the sample are those classified as “free shares” in the period from January of 2012 to January of 2018. The results showed that there is a positive relationship between the portfolio turnover and performance of the equity investment funds, showing that managers have been able to take advantage of moments of mispricing in the market and that they carry out more trades in search of higher returns. This research extends the results in the literature as it shows that there is a positive relationship between the turnover and performance of equity investment funds that is independent of the way turnover or performance are measured, which has shown inconclusive results in previous studies. Furthermore, it presents evidence for a more representative and current sample in an emerging market.

Minimum Spending in Education and the Flypaper Effect

Education funds in Brazil comprise local revenue and intergovernmental transfers. This study analyzes the importance of budget structure on government spending in education by estimating the effects of two characteristics of the fiscal arrangement: (i) a minimum spending rule, and (ii) a set of intergovernmental transfers. The minimum spending rule has increased educational spending only for municipalities that were below the minimum; for those above the minimum, we find a negative effect of the rule. Whereas our results indicate that the minimum rule has increased investments in low-spending municipalities, it has not affected spending in personnel for high-spending ones. We then analyze whether the sources of funds matter to government spending by estimating the flypaper effect of intergovernmental transfers using an instrumental variable method. We find a significant flypaper effect for redistribution transfers. Interestingly, we do not find flypaper effect for other types of intergovernmental transfers.

Investors’ behavior and mutual fund portfolio allocations in Brazil during the global financial crisis

In this paper, I examine the flow and performance of mutual funds in Brazil and their portfolio allocations during the global financial crisis. First, I show that mutual funds exposed to deposits and securities issued by small banks suffered significant outflows, due to the increased risk aversion following Lehman’s default in 2008. The returns of funds exposed to small banks were also negatively affected. Funds adjusted their portfolios by reducing their exposures to deposits of small banks, but they increased risk taking when term deposit coverage limits were raised. The distress among small banks also generated negative spillover to the portfolio management business of banks, reducing their numbers of investors. The results illustrate the potential risks to financial stability, to the extent that interconnections among funds and banks can induce the transmission of shocks across markets.

The TODIM multi-criteria method applied to the ANBIMA ranking of Brazilian investment funds

ANBIMA, the Brazilian Financial and Capital Markets Association, monthly presents the ranking of investment funds management by category. This ranking makes available information about the management of resources from players that invested in funds in Brazil. The institutions that are included in this ranking are ordered based on the total amount of the net equity under management in all categories of investment funds. The research presented in this article applies the TODIM multi-criteria method for building the ANBIMA ranking of June 2017 using the ten best-positioned institutions. In order to accomplish this, each participating institution is considered as an alternative and each category of investment fund functions as a criterion. This allows for a comparison between the ANBIMA ranking against the ranking obtained by using the TODIM method. This comparison points to the possibility of making use of a new, enriched system to order the institutions based on pairwise analyses and taking into account expressions of gains and losses.

Relationship between Portfolio Distribution, Management, and Composition and the Performance of Brazilian Fixed-Income Investment Funds (2011-2018)

This study analyzes the relationship between portfolio distribution, management, and composition indicators and the performance of fixed-income funds in Brazil. It provides support to investors when making decisions regarding their investments. A sample composed of 1039 Brazilian fixed-income funds from January 2011 to December 2019 was analyzed using a panel data analysis methodology and considering robust standard errors. The performance fee charged by funds was found to be the variable that most helped increase the performance of Brazilian fixed-income funds. In addition, portfolios characterized by a higher proportion of fixed-income assets, less experienced management, managers concurrently responsible for a large number of funds, and greater net assets contributed substantially to improved fund performance, by generating the best risk-adjusted returns.

Pension funds and governance: The effect of government sponsorship

The issue of conflict of interest and information asymmetry underlies the relationship between management, sponsors, and pension fund participants. The governance system aimed at mitigating the conflict of interest and information asymmetry appears as practices that, even with the cost, could contribute to the effectiveness of the pension fund investments. In this context, the present study aimed to investigate empirically how the extent of Brazilian pension funds governance practices is affected by the nature of the sponsoring entity. With a sample of 208 observations collected manually, representing 104 pension funds, from 2013 and 2017, we analyzed the impact of the sponsorship on the governance of the Brazilian pension funds. We measured governance using a governance index composed of 34 indicators, built on the Brazilian pension fund legislation, guidelines and recommendations issued by public bodies, and the governance literature. The result of this study indicates that, contrary to the initial expectations of the survey, a state-controlled company sponsorship explains a better level of governance. This study contributes to a better understanding of how the adoption of governance practices works, especially with the reported cases of corruption in Brazilian pension funds.

Stochastic frontiers of efficiency for Brazilian investment funds: a panel data analysis

Foundations, methodological and empirical possibilities of measurement and analysis in the performance of financial investments within investment funds have been developed since they were once introduced in the 1970s, thus establishing a path of growing acceptance in financial markets and universities’ academies. The first approaches over the efficiency of these funds, considering their stochastic implications, occurred in the late 1990s and have evolved with the help of SFA – Stochastic Frontier Analysis, although it still needs more careful verification. This article measured and analyzed the stochastic frontier of efficiency over 33 different Brazilian investment funds from 2012 to 2015. For doing so, Battese and Coelli’s (1995) specifications was used. It shows the effects of inefficiencies, which are defined as explicit functions of specific factors in the context of panel data funds. They are estimated by the maximum likelihood method. Sharpe ratios (SR) were also calculated for comparative purposes. Based on these two indicators (SFA and SR), the most recommendable funds to invest and the ones in which the application should not be performed were identified. Such procedures have stimulated the necessary and promising studies, as well as future researches, which, in turn, may establish new methodological formulation as an efficient and effective instrument to choose the best and the safest funds to invest.

The TODIM multi-criteria method applied to the ANBIMA ranking of Brazilian investment funds

ANBIMA, the Brazilian Financial and Capital Markets Association, monthly presents the ranking of investment funds management by category. This ranking makes available information about the management of resources from players that invested in funds in Brazil. The institutions that are included in this ranking are ordered based on the total amount of the net equity under management in all categories of investment funds. The research presented in this article applies the TODIM multi-criteria method for building the ANBIMA ranking of June 2017 using the ten best-positioned institutions. In order to accomplish this, each participating institution is considered as an alternative and each category of investment fund functions as a criterion. This allows for a comparison between the ANBIMA ranking against the ranking obtained by using the TODIM method. This comparison points to the possibility of making use of a new, enriched system to order the institutions based on pairwise analyses and taking into account expressions of gains and losses.

International Diversification in Brazilian Equity Mutual Funds: Understanding Asset Allocation to Emerging and Developed Countries

The aim of this article is to investigate the relationship between mutual fund international diversification strategy in assets from emerging and developed markets, and fund performance and risk. From our data analysis we are able to sketch a panorama of the international diversification of mutual funds. Currently, diversification is low and concentrated in US stocks. The empirical finding suggests there are certain benefits to international diversification in terms of increased returns and reduced risk, especially for Brazilian mutual funds holding developed market stocks.

Fundos de pensão no Brasil: princípios para uma crítica marxista

Resumo Sob a égide do acabouço teórico-metodológico marxista, este artigo tem por objetivo propor elementos críticos à dinâmica de funcionamento dos fundos de pensão no Brasil. Articulando-se a revisão bibliográfica sobre a temática e o uso de dados empíricos, o texto divide-se em duas seções. A primeira oferece uma visão panorâmica acerca do papel de tais fundos em países centrais e periféricos, tendo em perspectiva seu lugar estrutural no contexto capitalista de mundialização, crise estrutural e ofensiva neoliberal. A segunda seção apresenta as etapas estruturantes que forneceram as bases materiais para expansão dos ativos dos fundos de pensão no país, com destaque para os fundos destinados a servidores públicos. O artigo revela o maciço poder monetário desses fundos e sugere validade à hipótese de que estão configurados para estarem a serviço da alimentação dos mercados financeiros, em detrimento da proteção previdenciária.

Tail Risk Exposures of Hedge Funds: Evidence From Unique Brazilian Data

This paper examines tail risk in the Brazilian hedge fund industry. We rely on a unique data set of daily returns for every hedge fund in Brazil, dead or alive. By employing the universe of hedge funds, we ensure the absence of selection, survivorship, and instant history biases. We estimate tail risk measures based on the cross-section of both equity and hedge-fund returns. We consider three tail risk measures. The first extracts a tail risk measure assuming that the tail of the cross-section distribution has a power law representation, whereas the second and third rely on the expected shortfall of the cross-section distribution under the physical and risk-neutral measures, respectively. We find that the tail risk estimates are very different not only across asset classes (equity vs hedge fund), but also across probability measures (physical vs risk neutral). More interestingly, we also show that, although the hedge fund industry in Brazil seems to exhibit more exposure to equity tail risk, hedge fund tail risk entails higher predictive ability to performance both over time and cross-sectionally.

ACTIVE MANAGEMENT: WHAT DIFFERENT STORY MEASURES TELL US IN BRAZIL?

This paper extends the debate about the evaluating the active portfolio management in order to guide academics and practitioners undertaking researches about the contribution of active management on the performance in equity mutual funds in the Brazilian market. We present a comparison between two measures of active management: Churn Rate and Active Share. Using five year-data set covering the Brazilian equity mutual funds, between 2007 and 2011, we estimate econometric models to find the relation between active management and performance. The results evidence that Churn Rate presents a negative relationship to performance, while the Active Share has a positive effect for the same period. Based on our results we can state that a combined-measure analysis can lead us to a better understanding about the type of active management that the manager is involved, avoiding misleading interpretation about the role of each strategy on the portfolio performance.

Brazilian Social Funds: The lessons learned from the Norway fund experience

Since the middle of the last century, the world has seen the emergence of Sovereign Wealth Funds (SWF). According to the Sovereign Wealth Funds Institute (2012), these legal entities can be defined as “a state-owned investment fund or entity that is commonly established from balance of payments surpluses, official foreign currency operations, the proceeds of privatizations, governmental transfer payments, fiscal surpluses, and/or receipts resulting from resource exports.” The SWFs are governed by the Santiago Principles, a document constructed by the IMF's International Working Group of Sovereign Wealth Funds (IWG) to recommend and to standardize the applications and investments of this kind of fund. SWFs are created in order to meet macroeconomic demands, using a series of investments strategies, which including foreign assets acquisitions. For instance, the Norwegian Government Pension Fund is one of the world's model SWFs. Its revenue is obtained from petroleum exploitation and is considered a savings fund, although part of the financial return can be applied in budget deficit. Following this example, Brazil created the Pre-Salt Social Fund to invest pre-salt petroleum revenues, and consists of a savings fund, according to the IMF classification. The present article focuses on the analysis and comparison of the legal structures of the Norwegian Government Pension Fund (GPF) and the Brazilian Pre-Salt Social Fund (SF), aiming to understand if the Brazilian fund applies the Norwegian standards.

Window Dressing Em Fundos De Investimentos No Brasil (Window Dressing in the Brazilian Investment Funds)

Portuguese abstract: Este artigo busca aferir a existencia de window dressing no mercado brasileiro de fundos de investimento em acoes. O window dressing e uma pratica que apresenta determinada composicao do portfolio ao mercado, diferente daquela mantida pelo fundo no periodo de reporte. Momentos antes do fechamento do periodo, gestores de fundos alteram suas posicoes com objetivo de apresentar em carteira papeis eventualmente mais seguros ou mais rentaveis. Acreditamos que existe uma lacuna de resultados empiricos para o tema proposto por esta pesquisa no Brasil. Pesquisas anteriores enfatizam diversificacao, analise de estilo, rotatividade da carteira do fundo, papel dos gestores e desempenho. Portanto, acreditamos que o presente estudo e pioneiro ao apresentar resultados sobre window dressing no Brasil. Com a existencia de window dressing, o mercado pode sinalizar resultados distorcidos e guiar a alocacao de recursos por parte dos investidores em fundos que eles nao investiriam na ausencia de tais praticas. Em adicao, a adocao de window dressing pode apresentar aumento nos custos de transacao e, portanto, destruir valor. Os resultados encontrados apresentam conexao com as pesquisas previas de Bremer e Kato (1996), O’Neal (2001), Ng e Wang (2004), Ortiz, Sarto e Vicente (2012) e Agarwal, Gay e Ling (2014). Este artigo apresenta evidencias favoraveis a pratica de window dressing nos fundos de investimento em acoes no Brasil e propoe um estudo empirico para aferir a existencia da pratica de window dressing entre 2010 e 2016 por meio das tecnicas de analise de residuos, diferenca entre rankings e diferenca de retornos reversos. Em suma, encontramos resultados consistentes para a pratica de window dressing em fundos de investimento geridos por instituicoes pequenas, perdedores ante o Indice Bovespa e que apresentaram alto tracking error no periodo. English abstract: Results and contributions of the article: In a nutshell, we find consistent results for Window Dressing in funds managed by small companies, losers against IBOVESPA and which presented high Tracking Error in the period. Purpose of the work: This paper investigates the presence of Window Dressing in the Brazilian investment fund market, focusing on equity funds. Window Dressing is a practice that consists of disclosure a portfolio composition to the market, different from that maintained by the fund in the reporting period. Just before the end of the period, fund managers change their positions with the sole purpose of presenting safer, more profitable papers or both. Gap: We believe that there is a lack of empirical evidence on this topic in Brazil. Relevance of the chosen theme: Considering the presence of Window Dressing, the market may signal distorted results to investors and guide their allocation in direction of funds they would not invest in the absence of such practices. Moreover, the adoption of Window Dressing may increase transaction costs and thus destroy value. Impact on the area: Our results are related to previous literature by O'Neal (2001), Ng and Wang (2004), Bremer and Kato (1996) and Ortiz, Sarto, Vicente (2010) and Agarwal, Gay and Ling (2014). This paper provides evidence of Window Dressing in Brazilian equity funds. Methodology: Our paper proposes an empirical study to verify the presence of Window Dressing from 2010 to 2016. We adopt Market Model Residuals, Rank Gap and Backward Holding Return Gap empirical strategies.

Body and otolith shape analyses of the Brazilian sardine, Sardinella brasiliensis, to differentiate population-units in the purse seine fishery off Brazil

Body and otolith shape analyses of the Brazilian sardine, Sardinella brasiliensis, to differentiate population-units in the purse seine fishery off Brazil

Portfolio Pumping in the Brazilian Stock Market

In this paper, we discuss the practice of portfolio pumping in Brazil. Although the topic is recurrent in other countries, few studies provide this analysis for the Brazilian case. The statistical study is elaborated in three stages: first, we considered Brazilian investment funds' shares for the period from September 2011 to June 2016, estimating daily excess returns of those funds based on the Ibovespa, considering and not considering the adjusted beta of the portfolios of those funds. Our results suggest that the practice of portfolio pumping is more frequent at the end of months ex-semester than at the end of semesters. When we consider the beta adjusted to calculate abnormal returns of the funds, we found a greater significance for the existence of this practice. In the second step, the funds were ordered based on their performance in the previous period (by month, semester, and year), which resulted in few relevant results for the analysis of the topic, despite what is proposed by the principal-agent problem literature. In the last step, we analyzed the practice of portfolio pumping in stocks traded on B3, ordering them by their participation in the portfolios and by their Market Cap. The results indicated that the stocks with greater presence in the portfolios of the investment funds have higher excess returns at the end of the periods, reinforcing the thesis that this increase in stock prices in those moments may be a consequence of a deliberate action taken by the managers of those funds.

Micro‐impacts of the Brazilian Regional Development Funds: Does lending size matter?

AbstractThis paper evaluates the micro‐impacts of regional development funds in Brazil—the Constitutional Financing Funds (CFF)—using fixed effects panel data models and generalized propensity score between 2000 and 2012. Assessing the industrial and commerce/services sectors using fixed effects models, the results provide weak evidence of a positive and statistically significant impact of the CFF on job creation and no statistically significant impact on labor productivity growth at the firm level. Regarding dose‐response estimates, the results present evidence of nonlinear effects after three years of financing, suggesting that the amount of subsidized credit plays an important role in creating jobs and improving firm productivity.

Fundos de Investimento: Performance Aplicando Modelo Carhart e Análise Envoltória de Dados

Resumo Este estudo avalia o desempenho de fundos de investimento brasileiros em ações, comparando retornos reais e indicadores paramétricos e não paramétricos de performance. A estimativa de desempenho e classificação dos fundos foi realizada com base na observação dos retornos reais e dos alfas obtidos do modelo de regressão linear paramétrica, de Carhart. Os indicadores foram comparados com os scores de eficiência relativa da análise envoltória de dados, do modelo não paramétrico de Banker, Charnes e Cooper. Os alfas foram estimados considerando os impactos dos fatores de mercado, tamanho, valor e momento nos retornos reais de cada fundo e os scores, tendo como insumos risco sistêmico, recursos disponíveis, custos e risco total, e, como produto de análise, os retornos. Identificou-se queda de performance dos fundos, apontada pela literatura, alta correlação dos alfas com os retornos reais, baixa correlação dos scores com retornos e mais baixa correlação entre alfas e scores. Isso indica que a escolha da medida de avaliação a ser utilizada consiste em uma importante etapa da seleção de ativos. Montaram-se, ainda, carteiras teóricas pautadas na eficiência e alfas identificando-se performance superior das carteiras baseada na eficiência, sendo que nenhuma delas superou a carteira de mercado.

Aspects of manager, portfolio allocation, and fund performance in Brazil

ABSTRACT This paper intends to contribute to the literature on investment funds in emerging markets by looking at the performance of multimarket funds in Brazil from a manager perspective. The aim of the paper was to analyze whether some characteristics of investment fund managers, as well as their portfolio holdings, can affect fund performance. In emerging countries both portfolio asset allocation and manager characteristics can help explain differences in the fund performance, which increases the relevance of this study. Therefore, the impact of this research lies in its revealing a significant relationship between risk-adjusted return and the portion of portfolios allocated to fixed or variable income, which seems that have not been explored in the context of emerging economies yet. A total of 6,002 multimarket funds were analyzed, covering the period between September 2009 and December 2015, using panel data with robust standard errors clustered by funds. We also employed robust statistics in order to assess some potential biases due to outliers, by analyzing the breakdown point in the estimated models. It should be noted that portfolio composition (allocation of portfolios into variable income and fixed income) was the most important factor in explaining a potential change in the performance of Brazilian multimarket funds. Also important were the effectiveness of the management of these funds, that is, the best risk-adjusted returns were delivered by less experienced managers, funds investing more in fixed income, managers with more funds under management, and larger funds.

Sulfur-based battery firms secure cash

Two firms vying to develop lithium-sulfur batteries, which could be more energy-dense and cheaper to make than today’s lithium-ion batteries, have received major boosts to their funding. Baseload Renewables, a 2017 spin-off from MIT, has raised $7.4 million from an undisclosed investor. Baseload will use the money to advance its lithium-sulfur flow batteries, which are designed to meet demand spikes on electricity grids. Baseload’s batteries feature cheap, readily available sulfur dissolved in water as the anode. The firm anticipates that its technology will enable batteries to be made for between 10 and 20% of the cost of equivalent lithium-ion batteries. The firm raised almost $2 million from MIT’s technology incubator, the Engine, when it launched last year. Meanwhile, U.K.-based Oxis Energy, a developer of batteries featuring a lithium anode and a sulfur-based cathode, says it will receive $5 million from Aerotec, a Brazilian private equity fund. The Aerotec investment will