Odebrecht Retirement Fund prepares to invest globally using smart beta

Odebrecht Retirement Fund is preparing to change how it invests offshore, following the regulatory changes approved in the first half of the year. Until then, the vehicle used to make investments in global assets, the multi-asset investment funds known as FIC FIM IE, only allowed the company to acquire shares from local funds that in turn make investments in funds in other countries. With the new regulation, the pension fund is allowed to use an FIM IE, which is offshore multi-asset investment fund that can acquire directly shares in funds located abroad.

According to the investment officer of Odebrecht Retirement Fund, Gustavo Liberali, the first strategy to be adopted in the international market with this new format will be smart beta, through ETFs. The consulting firm F3 Capital will select the vehicles to be included in the fund’s portfolio. Liberali, before assuming his current position, in July 2018, was the partner responsible for compliance and risks at F3 for some two years. “With smart beta, we are not using solely passive strategies. Although we do not determine which specific securities are acquired, we select which factors, such as value, growth, etc., that guide our buying,” said the expert.

International investments already account for some 8% of the portfolio of Odebrecht Retirement Fund, which has approximately R$3 billion in assets. The investment director noted that, based on his analysis, the best funds in the international market do not even launch feeders in Brazil, since they already enjoy sufficiently strong demand from foreign investors, with no need to seek out investors in other markets. With the new strategy, “we can allocate resources to these funds, which were out of reach of Brazilian investors until now,” said Liberali.

Profiles – The investment profile model adopted by Odebrecht Retirement Fund is “target date fund,” which is best known in Brazil as “life cycle,” in which allocation limits changed based on life stage of the plan member. In 2018, these profile models completed four years of implementation, which is sufficient time to submit them to a review over the coming months, said the company’s investment officer. “We may possibly change the investment allocation limits of the profiles,” said Liberali.

André Luis Suaide, chief financial officer, said that participants’ questions about the returns on the investments have fallen off sharply since implementing the profiles. “Until 2014, around 80% of interactions with members involved responding to their questions about the returns of the plans. After we adopted the profiles, of the some 4,000 contacts each month, less than 1% involves investments.”

Among the new features expected for Odebrecht Retirement Fund in the coming months, Suaide includes the possible launch of a new plan for the relatives of its members, as well as an insurance to cover longevity risks, which now can be used by foundations, following publication of Resolution 345 by the National Private Insurance Council (CNSP), in May 2017. “We created our own longevity insurance policy and are seeking in the market an insurer interested in structuring it,” said the officer.