Pension funds to invest in infrastructure receivables

Monday, July 28, 2003

Pension funds of Brazilian government-owned companies are likely to finance infrastructure projects through investment funds guaranteed by payment rights, local press quoted Funcef chairman Guilherme Lacerda as saying.

Funcef, Brazil's second largest pension fund, is one of the institutional investors the government's draft three-year budget says will bring fresh money to infrastructure projects.

The government and Brazil's three largest pension funds - Previ, Petros and Funcef - are still discussing a model that will not threaten the funds' assets.

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According to Lacerda, pension funds of government-owned companies will likely be required to buy shares in investment funds managed by BB, CEF and BNDES, three government-controlled banks.

The investment funds would lend money to projects, while offering fund shareholders a minimum yield and guaranteeing the investment with payment rights, or receivables, from the borrower.

If the minimum yield is equal to pension funds' return on assets (ROA), the shares will be compatible with funds' investment strategies.

Brazil's employer-sponsored pension funds had combined assets of 203bn reais (US$70.5bn) at the end of April, according to pension fund association Abrapp. Previ, Petros and Funcef had combined assets of 175bn reais, making up 86% of the industry. Previ had 70.8bn, Petros 52bn reais and Funcef 9bn reais.

Previ and Funcef are the pension funds for employees at government-controlled banks BB and CEF respectively, while Petros is the pension fund for government-controlled oil company Petrobras.