Fitch: New CVM Instruction Brings Opportunities for Fund Diversification
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.
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