By Guillermo Parra-Bernal
SAO PAULO, Jan 16 (Reuters) - Asset managers in Brazil face a challenging year raising client funds as higher borrowing costs and a presidential election, alongside the removal of monetary stimulus in the United States, make investors skittish, industry group Anbima said Thursday.
Clients are reluctant to pour money into asset management and hedge funds given the outlook, said Anbima vice president Robert Van Dijk, although privately-owned pension funds, government-sponsored funds and private banking clients were likely to prove an exception.
"Some investors are taking a long-term view, but in general what you feel is that there is a more conservative tone across the market," said Van Dijk, also a senior executive at Votorantim Wealth Management.
Foreign investors, corporate clients and local retail investors drew some 24 billion reais ($10 billion) from domestic funds last year, data from the São Paulo-based group showed.
Many investors have been increasingly critical of President Dilma Rousseff's heavy-handed intervention in some industries and her reluctance to tackle growing imbalances on fiscal and external fronts.
Net fundraising totaled 59.7 billion reais last year, the lowest number in five years and below the historical average since at least 2007, Anbima said. In 2012, funds attracted a net 103.1 billion reais.
The numbers provide fresh evidence of the impact on investor perceptions of declining monetary stimulus in the U.S. and a deterioration in Brazil's fiscal position.
Brazil has the world's seventh-largest fund industry, with 2.47 trillion reais - about $1.1 trillion - of assets under management.
In terms of asset classes, fixed-income and hedge funds saw the largest redemptions last year.
Executives at Anbima would not detail expected asset class performance this year, but said clients would remain attentive to political risk and global market trends when deciding what to do with their money.
October's election, in which Rousseff is expected to seek a second term, is a concern for investors. Polls show Rousseff would beat any challenger if the elections were held today.
In 2013, investors boosted demand for more liquid assets, or financial instruments that can change hands faster, while cutting their share of stocks and government debt in overall portfolios, Anbima said.
Outstanding securities linked to repurchase agreements rose to 25.4 percent of total assets under management in Brazil, up from 22.3 percent in 2012.
The amount of government debt holdings fell to 35.6 percent of the total from 39.5 percent in 2012, following a steep jump in debt yields as the central bank raised the benchmark Selic overnight lending rate six times last year.
The central bank raised the Selic by a higher-than-expected 0.5 percentage points to 10.5 percent on Wednesday.
Market turmoil led to a dramatic spike in government bond yields between the first- and third-quarters of last year, fueling huge losses for some securities - especially fixed-rate and inflation-linked bonds with long maturities.
Part of that impact may have reduced the share of government debt in total holdings, said Luiz Sorge, a director at Anbima.
Stocks fell to 13.7 percent of total AUM in 2013, from 14.1 percent the prior year, following a tumble in the Bovespa benchmark stock index.
Equity holdings in Brazil are well below the global fund industry's 43 percent reading, Sorge said.
The share of investments in corporate credit instruments rose to 11 percent last year from 9.7 percent in 2012. Asset managers are moving into that category, including asset-backed securities and credit investments, to chase higher returns.