Reuters: US Dollar Report: UPDATE 1-Brazil funds need to adapt to 'new reality' -Mendes

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UPDATE 1-Brazil funds need to adapt to 'new reality' -Mendes May 14th 2013, 13:48 Tue May 14, 2013 9:48am EDT * Funds face low rates, declining government debt * Mendes affirms macroeconomic policy framework * Declines to comment on monetary policy trends SAO PAULO, May 14 (Reuters) - Brazilian asset managers must adapt to low interest rates and a declining government debt burden, central bank director Aldo Mendes said on Tuesday, in the latest call for financial markets to increase funding for fresh investment. The nation's fund managers, who for years made hefty profits, mostly by refinancing government debt, need to embrace "a cultural change" that encompasses investing in other assets, Mendes said at an industry event in São Paulo. Mendes affirmed that "this new moment" was taking place under a macroeconomic policy framework supported by a floating exchange rate, a mandate to keep inflation under control and responsible government spending practices. For the past two years, some investors have said President Dilma Rousseff's administration has sought to abandon that model to pursue faster economic growth. "The biggest challenge for the industry going forward is embracing a cultural change," Mendes said. "The cultural change has to reflect the fact that our reality has structural elements that are making the economy different from that of recent years." Brazil's asset management sector is the world's sixth-largest, with more than $1.2 trillion in assets under management. A decline in domestic borrowing costs to a record low last year is forcing money managers to build a more diverse base of financial instruments to help lure new clients and propel returns. Mendes declined to comment on monetary policy trends when sought on the sidelines of the event sponsored by Anbima, the group representing investment banks and asset management firms in Brazil. Link this Share this Digg this Email Reprints

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