Insurance - Brazil - Principal sees opportunities amid low interest rate environment
Principal Financial Group (NYSE: PFG) sees opportunities to take advantage of the current low interest rate environment in Brazil, Principal's US 401-k specialist president for Latin America, Roberto Walker told BNamericas. In Brazil, Principal sells private pension plans through Brasilprev - a joint venture with the country's largest bank, BB - and also owns a 60% stake in wealth management company Claritas. "We think that Brasilprev is well positioned in the current scenario. We were the first to launch life-cycle funds, which we think responds very well to the future savings needs of Brazilian customers," Walker said. Brazil's central bank began a monetary easing cycle in August 2011 and has since delivered an unprecedented 525-basis point rate cut through successive reductions, leaving the policy rate - known as Selic - at 7.25% at its last meeting earlier this month. "In the past, investing in Brazilian fixed income was enough, given high interest rates. But now that rates have fallen considerably, clients need to diversify and seek other types of portfolios to achieve a good pension," Walker said. "This is starting to change in Brazil, and we see it as an opportunity." Claritas' gamut of products and investment strategy is very different to those of large asset managers in Brazil, Walker said. "Given falling interest rates, we thought that the appetite and the need to invest in the kind of assets that Claritas manages were going to grow, and that is already happening faster than we expected." "Our timing was very lucky. We had anticipated a drop in rates in Brazil but not at this speed," Walker said. In Latin America, Principal also operates in Mexico and Chile. In the latter, it recently announced the purchase of private pension fund manager AFP Cuprum for US$1.51bn. The full interview with Walker will be available for subscribers in this week's Insurance Perspectives.