Brazilian insurance firm SulAmerica launched the Sul America Sas Capital Protegido Fundo de Investimento in July, its first structured fund aimed at Brazilian retail investors after five years of inactivity in the local structured retail products market. SRP spoke to Rony Stefano, superintendente de crédito estruturado, to discuss SulAmérica Investimentos’s plans in the market and the opportunities opened up by the introduction in the market of structured notes - certificado de operações estruturadas (COE), earlier this year.
What can you tell us about SulAmérica Investimentos and your role?
I am in charge of structured credit products. SulAmérica Investimentos is a very well known and respected company in the financial services industry. It’s the asset management business of SulAmérica Group, whose over 118 years of service have endorsed a very high credibility. There is a history of zero default on all of our credit offerings and the basis we are using is the same across our products, which is being very conservative.
Are there any plans at SulAmérica to enter the Brazilian certificado de operações estruturadas (COE) market?
We constantly monitor the market and follow what is coming up and what is happening. We always try to offer our clients a wide range of products. The COE still has some regulatory issues and as soon as they are solved we will analyse potential products for our clients. Meanwhile, we have funds with governance that we manage with small caps, so we have very sophisticated products already, including the structured credit offerings and the capital-protected fund we launched in July, an 11-month investment product that will repay the capital invested in full alongside 100% of the performance of the Petrobras stock, capped at 21% which raised BRL50m ($21.90m) during its offer period. We can provide a wide range of products.
How would you describe the Brazilian structured products market at the moment?
The market has been growing significantly. Both investors and providers are realising that these products are very good alternatives to raise funds at a cheaper cost and for investors to get exposure to higher yields assessed with relative certainty. With plain vanilla options you tend to get smaller yields in the Brazilian market, but structured credit offers much higher guaranteed with higher yields, which in a way is like cutting out the middle man for the benefit of the end investor.
The structured products market in general has been growing but is still relatively small. In SulAmérica, we foresee a greater growth in the upcoming years since the market continues to navigate the early stages of development. There is a lack of education and it is very common to get requests from potential companies that would like to access the market. We are providing education by explaining how the products work in our meetings with clients and investors. You need to have a very good understanding of these products, and that’s SulAmérica’s main expertise: looking for higher yields with the smallest possible risk.
How do you see risk appetite in Brazil? Capital-protected products are dominating the market, but for how long?
With regards to the pension funds, the best performance in the last year is actually coming from structured products. Despite the fact that it is still quite a small market, investors are seeing that there are positive returns with low volatility, so it’s growing at a very consistent pace. However, [providers] have to take into consideration that the products should match the market conditions as well as suitability, making sure it matches the correct client. That requires a good analysis and understanding of each product. I think the appetite is quite high, even though it varies month by month depending on the interest rates and the futures when there has been a lot of volatility, especially this year with the presidential elections in the country.
What can structured products offer to Brazilian investors?
Along with the higher returns compared with what’s commonly available with high guarantees, individual investors are also entitled to some tax benefits. These funds are long-term assets and they have a component of inflation with a very high interest rate, so they compensate for the term or length of the product. It all goes back to education. We see that the market is getting more and more sophisticated as more suppliers get involved and grow the pie.
What are SulAmerica’s plans in the credit space?
We are offering to our clients a wide range of products and we are aware of the benefits of structured credit products. Considering the main assets or products we have, this product provides real guarantees, so we believe this is a very safe product. This alternative has been showing a very consistent return with a very low volatility, especially for the pension funds clientele. SulAmérica Investimentos’s market is based more than 80& on pension funds, so this is an exceptional way for pension funds clients to diversify their portfolios looking for higher returns and low volatility.
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