Football World Cup and Olympics prompt opening of Brazil Investment Trust aimed at domestic infrastructure opportunities

News - Funds

Written by Ray Clancy

Tuesday, 30 March 2010 08:19

The 2014 World Cup football tournament and the 2016 Olympics offer significant opportunities to invest in Brazil as the country gears up for major infrastructure developments, it is claimed.

Up to US$50 billion is expected to pour into Brazil’s infrastructure prior to 2014, according to JPMorgan Brazil Investment Trust which claims to be the only UK listed investment trust focussed on investing in the country’s domestic growth

Sebastian Luparia, who will be managing the JPMorgan Brazil Investment Trust, says the top sporting events represent considerable investment opportunities. He intends to target stocks set to benefit from the estimated US$16 to 50 billion of investment needed to improve Brazil's infrastructure, which is being fuelled by the 2014 World Cup and the 2016 Olympics the country will be hosting.

‘In the last five years exports have tripled in Brazil, whereas infrastructure spending on areas such as ports, railways and communications has stayed the same. The forthcoming events have provided a deadline to improve such infrastructure and enormous spending, both public and private, has already been committed in preparation,’ he explained.

‘For example, the high speed rail link between Rio and Sao Paulo alone is estimated to require US$18 billion of capital investment. In addition to investment in the lead up to these major events, according to estimates, hosting the Olympic Games on average directly stimulates around a 1.5% increase in a country's GDP, rising to 3% in cities such as Rio de Janeiro that do not have strong infrastructure prior to hosting events of this scale,’ he said.

The JPMorgan Brazil Investment Trust will focus on these investment opportunities by investing in domestic infrastructure, communications, financial services and consumption rather than tracking the Brazil MSCI index which is overweight commodities and exports and is dominated by two companies, Petrobras and Vale.

‘Brazil’s large population of 199 million and continental sized economy means that domestic consumption and growth would dominate the portfolio. However if we found growth opportunities in commodities, for example, we wouldn’t ignore them. We would aim to be significantly diverse from the index as we see rising public and private sector investment driving economic growth rather than exports of commodities. Our portfolio weightings would always reflect this,’ added Luparia.

JPMorgan Brazil will be the only UK investment trust focused on Brazil, offering access to companies exposed to the domestic economy through a London listed investment vehicle, it said. It will focus on opportunities offered by smaller sized companies that are likely to experience significant growth.

The JPMorgan Brazil Investment Trust is currently in its offer period which will close on 16th April 2010. In addition, the Investment Trust is offering subscription shares on a one for five basis during this period. Trading is expected to commence on 26th April 2010.