How can Indian investors invest in Brazil?

by Manshu on May 25, 2010

in Mutual Funds

A reader emailed me with this question today, and it got me interested to find out how an Indian investor can get exposure to Brazil.

First, I started off by searching how a retail investor can directly buy stocks in Brazilian equities, but that didn’t go anywhere. If anyone has any information on this – please share.

Next, I searched for mutual funds that help investors take exposure to Brazil. I have written about the HSBC Brazil Equity fund earlier, and though that fund is not yet launched, when it does get launched – it will be the most direct way for an Indian investor to get exposure to Brazilian equities. You can go to that post and read more about that fund.

I didn’t find any Brazil mutual fund that is currently open to Indian investors, but ING has a fund that is close. The ING Latin American Equity Fund is a fund that comes close.

This is a fund of funds, and the underlying fund is the ING (L) Invest Latin American fund. Here is the indicative asset allocation of the fund.

Instruments
Maximum Allocation
Minimum Allocation
Risk Profile
ING (L) Latin America Fund 100% 65% High
Money Market Instruments 20% 0% Low to Medium
Other overseas mutual funds 35% 0% High

The underlying fund is benchmarked against MSCI EM Latin America 10/40 index. As of May 06 2010, the country weightings of the Index were as follows:

Country Number of Companies Weight
Brazil 75 68.5%
Chile 16 6.4%
Colombia 8 3.0%
Mexico 23 19.6%
Peru 3 2.5%
Risk
Profile
ING (L) Invest Latin America Fund 100 65 High
Money Market Instruments including
reverse repo
20 0 Low to
Medium
Other overseas mutual fund schemes 35 0 High

As you can see from the above table, Brazil forms the majority of this index and that’s the main reason I say this fund is the closest Indian retail investors have as a proxy to invest in Brazil.

This fund has returned 36% year to date, and before I end the post, let me reiterate that fund of funds charge double fees, once their own, and then they also incur the fees of the underlying fund.

If you know of a good way to get exposure to Brazil, then please do share.

{ 4 comments… read them below or add one }

ctreit May 26, 2010 at 2:26 am

You can also invest in Brazil via ETFs. EWZ tracks the MSCI Brazil Index. It is very liquid and its expense ratio of 0.63% is not too high. Another ETF is BRF, a small cap stock fund with a slightly higher expense ratio and less liquidity.

Then there are many ADRs listed in New York and London. You can construct your own portfolio that way.

Unfortunately it is not possible for retail investors to invest directly in Brazil since an investor has to be accredited with the CMV, the local SEC. The CMV only accepts corporate entities who have a local custodian. But the registration process is too costly for an average retail investor anyway.

Reply

Manshu May 26, 2010 at 8:43 am

Thanks for sharing….that info was quite useful.

Reply

Renato valler August 11, 2011 at 8:34 pm

Dear Sir.Manshu,

lm brazilian and l live in uk,l have business partner whit the ones most reliable companys
from Brazil of solicitors ,l can find the best business in Brazil for your investors,if they like to invest in stock exchange also we can give legal assistence,as you know brazilian market grows very fast,we have minings,sugar manuactores,energy,properties and many others
business,if you like do talk about fell free to contact me
Best regards
Renato.

Reply

J Thomas December 4, 2010 at 11:58 pm

Yes an investor can invest directly, the question is will the investors be qualified as an accredited investor and woiuld they be interested to invest in a regulaiton D Private Placement Memorandum?

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