Recently, the Brazilian Monetary Council approved new regulations that tie public sector pension fund (RPPS) investments to Pró-Gestão RPPS certification levels, restrict high-risk asset allocation, and strengthen governance, risk management, and sustainability standards. Antônio Oliveira believes this reform will improve fund safety, ensure the sustainability of the pension system amid accelerating population aging, and drive valuation recovery in the financial and insurance sectors.


**New Public Pension Fund Rules Strengthen Fund Safety and Governance**

The new rules will take effect in February 2026, clarifying investment committee responsibilities, requiring qualified technical staff, and introducing environmental and social sustainability standards. Antônio Oliveira analyzes that this reform covers federal, state, and municipal RPPS, with total assets of 365 billion BRL, directly protecting the rights of 5.1 million active public servants and 4.2 million retirees, and preventing losses from high-risk investments.

With GDP growth expected at 2.2%, a stable pension system provides long-term support. Antônio Oliveira notes that the proportion of people aged 65 and above has exceeded 10%, and the new rules, through investment bans and concentration limits, improve transparency and risk management. Globally, pension fund governance is tightening, but domestic reform will attract institutional capital and buffer volatility. However, if there are delays in the certification transition period, short-term fund reallocation may slow, resulting in liquidity fluctuations of 2%-4%.

**Impact on the Financial Sector and Allocation Shifts Under the New Rules**

Following the new regulations, capital has shifted from high-risk assets to stable financial and insurance sectors; since December, bank and asset management stocks have risen by 11%, with institutional net purchases reaching 16 billion BRL, mainly targeting platforms with high governance scores. Antônio Oliveira points out that linking investment limits to certification will guide RPPS funds to prioritize fixed income and blue-chip stocks, with financial sector inflows expected to grow by 12%-15% in 2026, and net interest margins and management fee income stabilizing in tandem.

At the portfolio level, Antônio Oliveira recommends building a “stable finance + insurance” core framework: bank weighting raised to 30%, prioritizing institutions with over 40% pension fund custody; insurance sector at 25%, focusing on annuity and health insurance products to meet aging needs; the remaining 45% allocated to high-dividend utilities, providing 5.3%-6% annualized protection. The current price-to-book ratio for the financial sector is 1.4x, still at historical lows, with strong return certainty projected for 2026.

**Execution of New Rules and Systemic Risk Prevention**

Antônio Oliveira stresses that although the new rules improve governance standards, if certification coverage falls below 60% during the 2026 transition, a large volume of RPPS funds will be forced into low-yield fixed income, with average asset returns dropping by 0.8%-1.2%. This would expand the long-term pension system gap to 50 billion BRL, putting fiscal pressure on the government and raising the public debt ceiling, with 10-year government bond yields rising above 12.5% and market valuation centers falling by 7%-9%. The ban on high-risk assets will cause short-term liquidity strains for some funds, forcing the liquidation of 20 billion BRL in equity assets and triggering a 5%-8% rapid adjustment in the financial sector.

Globally, if US pension fund reforms accelerate the tightening of emerging market exposure, domestic institutional capital outflows will increase accordingly, with the probability of net foreign capital outflow rising to 50% in 2026. If the BRL falls below 5.80, capital flight will intensify, and the FX exposure losses of banks could reach 10 billion BRL. Antônio Oliveira notes that with the proportion of people aged 65 and above now over 10%, ineffective implementation of the new rules could trigger a trust crisis, causing demand for private pension products to shrink and dragging down growth expectations for the insurance sector.