Pension funds take advantage of rising interest rates to buy government bonds

With approximately R$ 1.14 trillion in social security resources under management, which corresponds to about 14.1% of the country’s GDP (Gross Domestic Product), pension funds are usually one of the main markers of major market trends, given its size and relevance.

With political uncertainties and doubts regarding the performance of economic activity, the largest Closed Complementary Pension Entities (EFPCs) have preferred to adopt a conservative bias regarding investment strategies for 2022.

With profitability targets to maintain the solvency of the benefit plans at around 4.5% per year, in addition to the variation in inflation, these investors have been taking advantage of the rich premiums offered by public bonds indexed to the IPCA (the country’s official inflation index). ) to go shopping.

During the second half of last year —in a movement that should extend and gain strength over the next few months—, foundations such as Petros, Petrobras, and Funcef, Caixa, have already taken the opportunity to invest a few billion reais in the purchase of NTN-Bs, also known as IPCA Treasury bonds, which can be traded through the virtual platform Tesouro Direto.

On Friday (21), these papers offered a real interest rate of 5.27% for maturities in 2026. For longer maturities, such as 2055, the yield above inflation reached 5.67% per year.

“In the last six months, with the expressive opening of the real interest curve, we made several purchases of NTN-Bs for managed plans at rates above the actuarial targets, totaling an amount greater than 6% of the consolidated investment portfolio [que soma cerca de R$ 100 bilhões]”, says Bruno Dias, president of Petros.

According to him, part of this allocation was financed by a reduction in exposure to equities in October, when the market interpreted the government’s disclosure of Auxílio Brasil as the loss of the fiscal anchor.

“At that moment, concerned with the prolongation of the impacts of this measure on the market, we reduced the exposure of the plans on the Stock Exchange in the order of 3% of the total investments of each plan”, says the president of Petros. “The scenario, which remains uncertain, recommends continuing the cautious stance.”

At Funcef, a pension fund for Caixa employees, a similar movement was observed.

During the last months of 2021, the entity, with around BRL 90 billion in equity, bought something like BRL 6 billion in NTN-Bs for the already more mature plans, in which most of the participants are in the phase of enjoyment of the benefit.

The intention is to maintain and even accelerate the tune during 2022, when the appetite for risk-taking will be much lower, says Gilson Costa de Santana, president of Funcef.

“Presidential election years are traditionally periods of high volatility”, says the leader.

Recent purchases of government bonds were partially financed by the sale of Vale shares, which came to represent approximately 22% of the portfolio in the largest plans under management, due to the strong appreciation in early 2021.

In order to mitigate the risk of excessive concentration on a single stock, the exposure at the miner has been gradually reduced over the last few months and is now closer to 8%.

Santana says that new sales are not ruled out, depending on the evolution of the scenario and how stock prices behave.

“If you have a window that proves to be attractive, it can [a venda], not only of Vale, but of any role, within the strategy of significant risk reduction outlined in the investment policy”, says the president of Funcef.

He adds that, in addition to public bonds, the entity has increasingly turned to private fixed-income securities, from top-tier companies, which have accessed the market in search of financing for the expansion of operations.

Vivest’s investment director, Jorge Simino, says that he has preferred to keep most of the funds that come in via interest and dividend payments in short-term financial instruments, a position that should continue until the middle of the second half of this year, when he expects to find best alternatives available.

Even because, in the face of a double-digit Selic and an inflation that should go through some decompression, short-term interest will return to deliver real returns, emphasizes the specialist.

“With a Selic close to 12% and inflation around 6%, in 2022 we will have real interest rates on the short end of between 5% and 6% per year, with practically zero risk, something we have not seen even in 2020 and nor in 2021. This makes a tremendous difference”, says the director of Vivest, responsible for managing an equity close to R$ 45 billion in the largest private equity pension fund in the country, of companies in the electricity sector.

In this context, he says he reduced his exposure to the Brazilian stock market by around 40% in mid-September, as he identified a sharp deterioration in the outlook for the scenario ahead, both in Brazil and abroad.

“The international environment is starting to change, with discussions about reducing stimulus and raising interest rates by the Federal Reserve [banco central dos EUA]. It’s not that brigadier sky anymore”, says Simino.

Despite the less benign external scenario than imagined until recently, Dias, from Petros, points out that the international market is among the main alternatives on the radar for 2022, given an even more challenging domestic environment.

In October, Petrobras’ pension fund made its debut in the foreign investment segment, as part of its diversification strategy in search of greater protection and profitability.

After completing the internal process, an initial investment of R$ 224 million was made in funds from the global manager Schroders Investment.

“The main objective is to obtain a portfolio with low correlation with local assets, aiming at an optimization of the global performance”, says Dias. He also says he has plans to select new managers for a possible increase in exposure abroad, in order to expand protection to the rest of the portfolio.

With regard to the local Stock Exchange, although the feeling is of lesser enthusiasm in general, the assessment of the entities is that, for those plans still in the phase of accumulating resources, it is necessary to be attentive to the opportunities at the levels in which prices are found.

“For plans with a more accumulating profile, we see opportunities not only in fixed income, but also in variable income, and the moment can contribute to allocations with a risk appetite more focused on building long-term equity”, says the president of Petros. .

“When we look at participants in plans that have a longer term, we see good opportunities in variable income”, endorses Samuel Crespi, investment director at Funcef. He says that, for 2022, the entity intends to implement investment profiles, a model in which it is up to the participant to choose whether they prefer a more conservative or aggressive investment strategy.

At Valia, Vale’s pension fund with around R$ 25 billion, investment and finance director Maurício Wanderley says that employees have the option of choosing between investment profiles or a model known as life cycle. In this second case, the risk exposure of each plan varies automatically, according to the time the participant still has until retirement.

“Regardless of what will happen this year, we are doing long-term management, with horizons of more than 30 years. The year 2022 is just another year within this long window of time, and we need to be diversified and take the bias out of short term, because things can change very quickly, both for good and for bad”, says Wanderley.