Fitch: New CVM Instruction Brings Opportunities for Fund Diversification

SAO PAULO--(BUSINESS WIRE)-- According to Fitch Ratings, the main advantage from easing limits for investments abroad established by instruction 555/2014 of the Brazilian Securities and Exchange Commission (CVM), which become effective as of October 1st, is the possibility of portfolio managers and investors to increase diversification of their portfolios, by adding new exposure geographically and among asset classes.

In addition, the agency believes that portfolio managers will now have more tools available to implement their allocations, increasing portfolio efficiency and complementing the strategies available in the local market. While still making up a small portion of industry AUM, recent exposure to foreign investments has expanded significantly, and an easing of limits was expected by the market.

However, an aspect of concern for the regulator is the strengthening of its control over investments in foreign assets. In Official Letter No. 1/2015, published on May 18, 2015, CVM reaffirms the asset manager's fiduciary duty and the need for it to have sufficient knowledge about the markets and products in which it decides to invest, including assets abroad.

In Fitch's view, those involved in investment decisions (CIOs, portfolio managers, analysts, among others) still need to accumulate more experience through the market cycles in these asset classes to which they will be exposed. The agency believes that there will be a gradual improvement in the level of analysis and coverage of these strategies.

In general, the changes help to further modernize the Brazilian fund industry and are beneficial both for asset managers and investors. The existing funds will need to comply with the new regulations by June 30, 2016.

These and other consequences of the new rule are analyzed in the special report 'ICVM 555, the New 409: Changes to the Brazilian Fund Sector', published July 31, 2015, available at www.fitchratings.com.br.

Additional information available at 'www.fitchratings.com' or 'www.fitchratings.com.br'

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150831005890/en/

Fitch Ratings
Tiago Carrara
Associate Director
+55-11-4504-2217
Fitch Ratings Brasil Ltda.
Alameda Santos, 700, 7th floor, Cerqueira Cesar
Sao Paulo - SP - CEP: 01418-100
or
Alexandre Yamashiro, CAIA
Director
+55-11-4504-2606
or
Davie R. Rodriguez, CFA
Senior Director
+1-212-908-0386
or
Media Relations
Jaqueline Carvalho, Rio de Janeiro, Tel: +55 21 4503 2623
[email protected]
Alyssa Castelli, New York, +1-212-908-0540
[email protected]

Source: Fitch Ratings

You May Also Be Interested In

• SEC proposes new rules for crypto asset investment contracts
• Backblaze proposes $150M convertible notes offering due 2031
• Wrap Technologies closes $12M stock offering at $1.40 per share