SAO PAULO (Reuters) - Previ Caixa de Previdência [PREVI.UL] has yet to decide when it will reduce a majority stake in Vale SA and other companies in which it is a relevant shareholder, as Brazil’s biggest pension fund aims to have less concentrated equity holdings, a senior executive said.
Chief Investment Officer Marcus Moreira said a reduction of Previ’s 15.7 percent stake in Vale (VALE3.SA) comes in tandem with a plan to reduce large equity holdings in a few companies. Previ can sell up to one-third of the Vale stake from February, under rules of the mining company’s corporate reorganization.
The strategy involves investing in smaller Brazilian companies, much of them stock market debutantes, Moreira said. A wave of domestic initial public offerings, Brazil’s busiest in four years, should allow Previ to diversify stockholdings. Currently 45 percent of Previ’s flagship fund is made of equity holdings in about 30 companies, he said.
“We can take advantage of the current IPO cycle to have smaller stakes in a larger number of listed firms,” Moreira said in a phone interview late on Wednesday.
His remarks underscore how Brazilian pension funds, which underwent heavy losses in recent years because of erratic investment decisions and heavy state pressure to invest in low-return activities, gear up for a prolonged period of lower interest rates.
Previ oversees 140 billion reais ($45 billion) of retirement money for workers of parent Banco do Brasil SA (BBAS3.SA), Brazil’s largest state-controlled lender.
Brazil's benchmark Bovespa stock index .BVSP this week touched the 70,000-point mark for the first time in almost seven years, as investors cheered a government plan to end voting control of a power utility. Lower rates have also increased the allure of stocks and other riskier investments, in contrast to steady government debt yields.
The fund will also increase holdings of credit products as part of an effort to bolster returns, he said. Previ is working to reduce an accumulated shortfall that last year reached 14 billion reais while preparing for a long cycle of redemptions in coming years, Moreira added.
Writing and additional reporting by Guillermo Parra-Bernal; Editing by Lisa Shumaker