Brazil’s Independent Brokers Are Losing Money Like Crazy
A year ago she was featured in the FORBES as a money manager to watch, but now Fernanda Lima’sbroker-dealer Gradual is in the red. Her firm, one of the largest and more successful independent brokerages, lost nearly $20 million in the first three quarters of the year, according to Brazil’s Central Bank. That number obviously rose higher in the fourth.
Local investors are leaving equity markets. And the fixed income market isn’t as appealing as cash account these days. With investor losses, come broker fee losses. One in three independent brokerage houses in Brazil are in the same boat as Lima’s Gradual Investimentos.
Brazil’s oldest broker dealer, Souza Barros, is closing its doors.
According to the Central Bank of Brazil, of the 166 registered broker-dealers in the country, 55 of them were losing money in the first three quarters of 2015. The situation is unlikely to improve this year for some.
Antonio Milano Filho, president of the 44 year old SLW Corretora brokerage firm in São Paulo said competition from the big money center banks were killing the independents as much as the economy.
“The trade volume in (Brazilian) stocks keeps declining for us, while the operational costs keep going up. There’s also a cannibalization of fees between brokers on the hunt for new clients,” Filho toldEstado de São Paulo newspaper on Wednesday.
Brazil’s weak economy is leading to consolidation in the sector.
Last year, six brokerage firms merged operations. In 2014, 10 firms merged. More deals are likely this year, according to PwC.
The top five firms lost roughly $50 million in 9 months, which in local currency is about R$200 million.
Gradual’s CEO Fernanda Lima was highlighted in the magazine last July for her IGB-30 index fund, a non-commodity fund that focuses on domestic firms not dependent on the export market. The index is down 11% over the last 12 months ending Feb. 4, but the iShares MSCI Brazil (EWZ) exchange traded fund is much worse, off by 41.2%.
Source: Forbes
