Speaking on the launch of the new Allianz RCM Brazil fund, Konstantinov insisted that the story in Brazil was not just about commodities and that focus would soon shift to the domestic demand story.
He said data from Santander Capital Markets showed that as of 12 September 2010, the Brazil MSCI Market Cap was made up of 47 per cent commodities, 37 per cent domestic cyclical and 16 per cent domestic defensive. By 2015 it is thought that focus will change, with only 25 per cent in commodities, 50 per cent in domestic cyclical and 25 per cent in domestic defensive.
"In 2015 focus will be on domestic demand and only a quarter will be in commodities. The domestic demand story will continue going forward, despite some uncertainties in the market," Konstantinov (pictured right) said
"It is a starting point to think about and all the investment opportunities in the fund will look at this. We want to access the part of the economy in Brazil which is thriving. And it is thriving very much in the areas related to domestic demand. Whether it is infrastructure, consumption or retail, everything is somehow linked to the rising middle class.
"Brazil is a huge country, which offers huge opportunities for investors. It is not only about the mega cap companies such as Petrobras and Vale, we are seeing most opportunities in the mid and small sized companies. Investment opportunities are rising by the day; it is one of the main attractions of Brazil. In the rising middle class area there are a lot of companies listed on the market in the mid and small cap segment which offer a lot of interesting long term growth opportunities," he added.
Konstantinov pointed to a number of Brazilian companies, the majority of which he said came to the market via IPOs, including OdontoPrev the largest dental care operator in Brazil, which accounts for 30 per cent of the market.
"The dental care market is still a highly fragmented and underpenetrated market in Brazil. There are 200,000 dentists in Brazil and dental services are very cheap. OdontoPrev can offer dental insurance for $7 a month," he said.
"With the rise of the middle class there is an increase in the need for insurance as more people can afford it. This is driving growth at the company."
Commenting on why Allianz had chosen to launch a Brazilian fund now, Konstantinov said this was because from a valuation point of view the country offered an attractive entry point.
"The best indicator of that is the fact that the country has come through the recent financial crisis relatively unaffected and has actually emerged with a higher growth rate than previously – between 5.5 per cent and 6 per cent," he said.
Data from Financial Express shows that over a three year period to 15 September 2010, the MSCI Brazil index returned 66.49 per cent beating the likes of Mexico, Argentina and emerging market giant China.
Performance of the MSCI Brazil index over 3-yrs
Source: Financial Express Analytics
Allianz says the new Brazil fund is the UK's only actively managed Brazil OEIC. Further analysis on Financial Express showed that whilst there are 135 IMA UT and OEIC defined funds with an exposure to Brazil, there are only three other IMA funds which have a sole focus on Brazil. These are the JPM Brazil Alpha Plus fund, HSBC GIF Brazil Equity and the BNY Mellon Brazil Equity fund.
The performance of these funds over a three year and one year period can be seen in the charts below:
Performance over 3-yrs
Performance over 1-yr
Source: Financial Express Analytics
Commenting on the lack of Brazil focused funds Konstantinov said this is something that surprises him.
"Brazil is an unknown, unappreciated and undiscovered country with so many opportunities, so it is strange there are not other funds. There are lots of China related funds but not many Brazil-related funds," he said.