BlackRock Makes New Push Into Tepid Brazil ETF Market

BlackRock Inc. is unveiling new products that give Brazilian investors access to international exchange-traded funds, in a push to popularize index-based strategies in the South American country.

The world’s largest asset manager will open up some of its iShares ETFs through locally listed Brazilian depositary receipts, or BDRs, according to the New York-based firm. B3 SA, the country’s sole exchange operator, will list them.

“There’s tremendous potential,” said Dominik Rohe, head of Latin America for BlackRock, citing ETF adoption among pension funds in Brazil’s neighboring countries. “In Brazil it will take time -- this is not something we expect will happen tomorrow or in a couple of months. For us this is a longer term plan.”

The move will give access to 37 additional ETFs for local investors through newly listed BDRs, expanding on the five ETFs it lists locally. The new products are mostly equity-based, including industries like aerospace and biotechnology, and sustainable strategies.

BlackRock Makes New Push Into Tepid Brazil ETF Market

Brazilian investors haven’t warmed to ETFs like in other parts of the world. Fewer than two dozen equity ETFs are listed in Brazil, even though the country boasts a sizeable asset-management industry. Of the 5.8 trillion reais ($1.1 trillion) invested in funds, only 0.5% are invested in ETFs, according to data from the local capital markets association Anbima.

All-time low interest rates and a recent regulatory overhaul brought opportunity for that to change. In August, regulators started allowing the creation of locally listed BDRs linked to overseas-listed ETFs, creating an easier mechanism for cross-listing the funds. It also allowed retail investors to buy BDRs for the first time. Before the change, ETFs had to be structured locally.

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Brazilians, who traditionally held back from investing abroad, are looking for ways to boost returns by dumping government bonds in favor of higher-yielding alternatives. The exchange-traded funds should also lower costs for investors and provide greater fee transparency to the market, Rohe said.

©2020 Bloomberg L.P.

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