Brazil’s Previ Won’t Cut Vale Shares Anytime Soon

The pension fund’s recent accounting changes boost the value of its stake in the iron ore miner.

Brazil’s largest pension fund has decided not to sell any of its stake in iron ore miner Vale, until at least next year, after an accounting change made the Vale holding more valuable.

At a conference in Rio de Janeiro, Previ’s chief executive, Jose Mauricio Coelho, said the $50 billion fund has plans to cut of its some Vale holdings in the medium term, but did not specify when exactly that is.

Following Coelho’s decision, the miner’s shares went up 3.1%, to $15.77. Shares have climbed 80% in the past year. The pension fund is one of its largest shareholders.

Previ, which manages retirement money for Banco de Brasil employees, recently changed its accounting practices for Vale shares, and now values it at the average market price of the past 90 days. The old rules would only let the fund adjust the prices once a year. Following bookkeeping changes, the fund saw a surplus of 2.3 billion reals ($624 million) in September, negating a deficit from earlier in the year, Reuters reports.

Previ retains Vale shares through the holding company Litel Participações. Other pension funds that are Litel shareholders include Petros, Funcef, and Fundação Cesp.

At the conference, Marcus Moreira de Almeida, the fund’s chief investment officer, said that Litel shareholders were discussing how exactly Litel would distribute the shares across the funds. No shares will be sold until after the distribution takes place, as it is the most tax beneficial way to do so.

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