UPDATE 1-Brazil asset managers have worst year for fundraising since 2002

Thu Jul 3, 2014 5:14pm EDT

(Recasts to add details on fundraising, comments, background throughout)

By Aluísio Alves and Guillermo Parra-Bernal

SAO PAULO, July 3 (Reuters) - Asset managers in Brazil raised the lowest amount of money from investors in 12 years in the first six months, an industry group said on Thursday, a sign that worries over the October presidential election, high borrowing costs and growing global market turmoil are scaring market participants.

Pension funds, asset management firms and other specialized money managers raised a net 1.94 billion reais ($878 million) from investors in the January-through-June period, Anbima, the group that represents funds and investment banks in the country, said in a report.

The data underscore a trend seen since the end of last year, with clients reluctant to pour money into asset management and hedge funds given the outlook. Many investors have turned heavily critical of President Dilma Rousseff's heavy-handed intervention in some industries and her reluctance to tackle growing imbalances on fiscal and external fronts.

Among client segments, government-sponsored funds and retail investors were the only ones that funneled money into money managers in the first half, Anbima said. In contrast, private banking, corporate clients, foreign investors and pension funds redeemed a combined 30.8 billion reais in the first half, compared with 46 billion of inflows a year earlier.

"We saw that investors flew towards short-term instruments to remain highly liquid," Carlos Massaru, a senior executive at state-run Banco do Brasil SA's asset management division BB DTVM, told reporters at a conference call. The year has so far been marked by "high volatility and a recovery of some specific segments, like equities."

The industry had lured 103.6 billion reais in the year-earlier period, and an average 48.1 billion reais for the first half since 2007, Anbima said. In 2002, investors withdrew a net 23 billion reais in the wake of a tense presidential election and fears that Brazil's government could default on its debt.

The numbers also provide fresh evidence of the impact on investor perceptions of declining monetary stimulus in the United States and a deterioration in Brazil's fiscal position.

Brazil has the world's seventh-largest fund industry, with 2.51 trillion reais - about $1.1 trillion - of assets under management.

($1 = 2.21 Brazilian reais) (Editing by Marguerita Choy, Bernard Orr)

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