Opinion – Grain in Grain: Find out how investors are behaving

Following what others are doing is not the best strategy. However, it is important to monitor the behavior of different investors to call our attention if we are missing an opportunity.

To monitor investor attitudes, an alternative available to everyone is Anbima’s monthly fund report. The report is released on the 16th working day of each month and the last one came out last Wednesday.

This report only presents information about the investment fund industry, but what matters is the direction of movements, intensity and segments.

Funding in investment funds was positive until February this year, but investors moved between investment classes: fixed income, stocks, multimarkets and foreign exchange.

Despite the Ibovespa having reached its low at the end of November last year, investors have continued to exit the equity fund class since September 2021.

Although the stock market appreciated in the year, the month of February had the highest redemption in the last 12 months. In the first two months of the year alone, more than R$20 billion in equity funds were redeemed. This volume represents 3.5% of the amount invested in this class of funds.

The volume invested in equity funds, at the end of February, dropped to the level of mid-2020. It is important to remember that at that time the value in points of the Ibovespa was lower than the current one. Therefore, the appreciation of the shares was not sufficient to cover the amount redeemed.

The stock’s appreciation was driven by the entry of foreign investors. Local investors, on average, were not comfortable with the risks.

Despite the fact that multimarket funds, on average, beat the CDI in the year, they suffered even greater redemptions than those in equity funds. In the year, their redemption amount exceeded R$ 36 billion, which represents more than 2.3% of this investment class.

The destination of these redemptions was fixed income funds. The scenario is exactly the opposite of what happened at the beginning of 2021. At that time, with the Selic yielding only the equivalent of 2% per year, investors redeemed fixed income to invest in stocks and multimarkets.

It is interesting to note that, even with the systematic fall of the dollar, which depreciated by almost 8% in the year to February, foreign exchange funds had positive funding in 2022.

When we evaluate the investor segments (private, high-income retail and retail), high-income retail stands out as the one that most redeemed stocks and multimarkets, in proportion to its portfolio.

High net worth retail investors have reduced their equity portfolio by more than 8% on average. Private investors reduced their equity portfolio by less than 1% and retail investors by just 3.5%.

One of the biggest explanations for the rebalancing of equities and multimarket to fixed income is the current level of the basic interest rate of the economy.

With the latest increases in the Selic rate by the COPOM, it returned to the same level as in early 2017. With the increase of another 1% that the COPOM should promote in May, the Selic rate should reach 12.75% per year. This rate is similar to the one in 2016.

At the end of 2016, the volume invested in equity funds was 4.3% of the total in investment funds. The highest proportion allocated to equity funds was reached in 2020, when it exceeded 10%. Currently, the volume in equity funds represents 8.1% of the total funds.

If investors seek the same allocation they had before 2018, we will still have a lot of bailout pressure in the stock market.

Michael Viriato is an investment advisor and founding partner of Investor’s House

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