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Wealth in the Brazil: Sizing the Market Opportunity

Published By :

Verdict Financial

Published Date : Apr 2016

Category :

Banking

No. of Pages : 36 Pages

It is a torrid time for the Brazilian wealth market. The country is in the depths of an enduring economic recession; with no immediate end in sight growth in the Brazilian wealth market is set to slow noticeably. Underlying this is deceleration in growth of the retail savings and investments market; equities in particular have plummeted thanks to the ongoing poor performances of the Bovespa since 2013. With such uncertainty, it is no surprise that local HNW individuals choose to hold almost 20% of their portfolio overseas. Yet Brazil is tightening up on offshore holdings, with individuals now required to report foreign assets and wealth over $100,000 to the Brazilian central bank.

Key Findings

  • Affluent individuals represent just 1% of the Brazilian population but hold 94% of the country

Table of Contents

EXECUTIVE SUMMARY

The Brazilian wealth market is charting a turbulent course
Key findings
Critical success factors

SIZING AND FORECASTING THE BRAZILIAN WEALTH MARKET
The onshore wealth market is highly concentrated at the top end
Affluent individuals account for 1.0% of the population
The Brazilian wealth market is heavily concentrated, with the affluent holding around 94% of total liquid assets

DRIVERS OF GROWTH IN THE BRAZILIAN WEALTH MARKET
Brazil's retail savings and investment market will suffer in the short term
The recession will hamper growth in the retail savings and investment market
Growth in the cornerstones of the market will slow
Retail deposits will follow GDP and are expected to contract in 2016
Interest rates reached double digits in 2015, as did inflation
Direct bond holdings are correlated to real GDP growth rates
The collapse in the Bovespa's performance will limit growth of mutual funds and equities
Direct equity investment is well correlated to the fortunes of the Bovespa

HNW INVESTMENT PREFERENCES
Brazilian HNW individuals allocate 24% of their portfolios into alternative and property assets
Brazilian HNW individuals invest heavily in hedge funds
Brazilian HNW individuals hold small levels of commodity investments
Brazilian property returns have been stellar but are set to fall
Brazilian HNW individuals have an increasing appetite for offshore allocation
Offshore wealth is most commonly held in the US
Local economic and political instability are the biggest drivers for offshore investments
Tax is a comparatively limited driver for offshore investments

APPENDIX
Abbreviations and acronyms
Supplementary data
Definitions
Affluent
Domicile
DTA
FATCA
HNW
Liquid assets
Mass affluent
Onshore
Residency
TIEAs
Methodology
Global Wealth Model methodology
Global Retail Investments Analytics methodology
Verdict Financial's 2015 Global Wealth Managers Survey
Bibliography
Further reading
About Verdict Financial
Disclaimer

List of Table


Table 1:  Brazil's DTAs as of November 2015
Table 2:  Brazilian income tax rates, April-December 2015
Table 3: Brazil: total liquid wealth ($bn) segmented by affluent category and asset band, 2009-14
Table 4: Brazil: total liquid wealth ($bn) segmented by affluent category and asset band, 2015-19f
Table 5: Brazil: adult population (000s) segmented by affluent category and asset band, 2009-14
Table 6: Brazil: adult population (000s) segmented by affluent category and asset band, 2015-19f
Table 7: Brazilian real-US dollar exchange rate, December 31, 2014 and December 31, 2015

List of Chart

Figure 1: Affluent individuals accounted for 1% of the population in 2015
Figure 2: Affluent Brazilians will continue to hold around 95% of liquid assets
Figure 3: The recession will cause a contraction in the Brazilian retail savings and investment market in 2016
Figure 4: Total retail savings and investments will exceed $600bn in 2019
Figure 5: Slower growth is forecast for mutual funds and deposits from 2015
Figure 6: Deposit growth is strongly linked to real GDP growth and will contract in 2016
Figure 7: Direct bond growth will shadow GDP from 2016
Figure 8: While mutual fund growth rates will slow in relation to GDP, equities are expected to recover strongly
Figure 9: Alternative assets form an important part of Brazilian HNW portfolios
Figure 10: Brazilian HNW individuals held almost 20% of their assets offshore in 2015
Figure 11: The US accounted for over 55% of Brazilian HNW offshore assets in 2015
Figure 12: Economic and political instability are the key drivers of offshore investment among Brazilian HNW individuals
Figure 13: Global DTAs and TIEAs signed with Brazil, 2015

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