About fifteen years ago, investments in investment funds by renowned managers and in public and private bonds were restricted to a few investors, both due to the minimum value and access. Brokers have transformed this market by reducing minimum investment amounts and allowing any investor to make investments. At this point, the National Treasury is making the same mistake as in the past of restricting investments in government bonds, but there is a solution.
However, the Treasury’s failure is not intentional, it occurred passively by appreciation. The good thing is that it can be fixed. Before explaining the failure and the proposal, I will comment on the root of the problem.
There are three basic types of remuneration for government bonds. The root of the problem lies in two of the types, those referenced to the Selic and the IPCA.
The problem lies in the so-called Updated Nominal Value (VNA).
The yield on IPCA and Selic-linked securities is made up of two parts: one is the fixed rate and the other is the correction that references the security.
These securities are corrected by updating the VNA index.
If a Treasury bond were a cake, the VNA would be the wheat flour that is used in everyone. Thus, what will change between the bonds are the other ingredients, that is, term and fixed interest rate.
Therefore, all public securities referenced to the IPCA have the same VNA.
The VNA is a value of R$ 1 thousand in July 2000, adjusted by the IPCA up to the current date. In the case of the VNA of securities referenced to the Selic, this index was also worth R$ 1 thousand in July 2000, but has since been corrected by the Selic.
It is the key piece that establishes the base value of each title. So, if the VNA is high, the unit price of a bond is high.
As inflation in Brazil is high, over time the correction made the VNA very high. The same effect occurred with Selic’s VNA.
The VNA of securities referenced to IPCA and Selic was R$3,984.16 and R$11,833.73, respectively.
Therefore, the unit price of public securities is, today, an inhibiting element for small investors.
Not every investor has more than R$11,000 to invest.
Additionally, if an investor has BRL 15,000, he cannot invest everything in Selic-linked securities, as he would only be able to invest in multiples of BRL 11,800.
In the words of the Managing Director of Mirabaud Investimentos, Eric Hatisuka, “it is expensive, in nominal terms, for the individual investor”.
He cites the Treasury Direct alternative to fractional trading. However, restricting the value and place of negotiation are elements contrary to a policy of popularization and incentive to private savings.
The Treasury Direct platform has the disadvantage of half-yearly cost and mark-to-market.
I have already discussed here the effect that mark-to-market brings. It causes long-term investor anxiety and ends up encouraging poor short-term decisions.
In an interview with Hatisuka last night he agreed with the following suggestion.
To solve the problem of high prices and encourage investment through any platform, an alternative would be to split the VNA, similar to what companies do with their shares.
When the price of a stock goes up a lot, its liquidity is partially compromised. Thus, companies carry out the operation, called a “split”, that is, dividing the price of a share by 10, followed by a multiplication of the quantity by 10.
For example, an investor who had one share at a price of R$100 would have 10 shares at a price of R$10 each.
If the National Treasury “split” the VNA of Selic-referenced securities, an investor who owns one LFT (Selic Treasury) at R$11.8 thousand would have 10 LFTs at R$1.18 thousand each. Therefore, a more reasonable nominal value to invest.
A similar movement could be carried out in the VNA of IPCA-referenced securities.
This attitude is recognized in the financial market as promoting securities liquidity. Therefore, the National Treasury would be contributing to a greater popularization of investments.
Michael Viriato is an investment advisor and founding partner of Investor’s House
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I have over 8 years of experience in the news industry. I have worked for various news websites and have also written for a few news agencies. I mostly cover healthcare news, but I am also interested in other topics such as politics, business, and entertainment. In my free time, I enjoy writing fiction and spending time with my family and friends.
