Opinion – Marcos de Vasconcellos: Darlings of those seeking passive income, real estate funds are ‘crushed’

The sector that employs the most in Brazil, civil construction, has suffered from rising interest rates and, as a result, hurting the financial market.

The increase in credit prices – a measure used to fight inflation – has “crushed” the darlings of those who invest in search of passive income: real estate funds.

The best way to explain real estate investment funds (FIIs) is to compare them to the purchase of small pieces of hundreds of properties (in the case of the so-called brick funds) and, with that, receive a little bit of the rent received for each property.

According to a survey released this week by the Imovelweb website, anyone who buys a property in the city of São Paulo to rent to third parties takes, on average, 17.3 years to get their investment back. In the REITs market, however, there are funds that pay dividends of 10% a year. In other words: the deadline for obtaining a return can be accelerated by seven years.

But while the price of rent increased by 6.31% this year, the price of real estate funds plunged 11.2%. Since the beginning of 2020, in fact, the Ifix, index that shows the average performance of the FIIs, has fallen twice as much as the Ibovespa, the main stock market indicator.

This drop in the value of real estate funds was even more pronounced in the last month, when the Ifix fell 7%.

As a result, distortions have appeared in the market, such as real estate funds that still have the same properties in their portfolio as they had a year ago, but are costing less than their own properties — or equity.

The explanation for the strength of this downward movement is the recent sale of large lots of FIIs on the Stock Exchange. And where does this series of massive sales come from? Mainly from other funds, the multimarket funds — which are selling off their shares of REITs.

It turns out that multimarket funds have repositioned themselves to allow withdrawals from clients — who, dissatisfied with their variable income income, have migrated to fixed income assets. And the REITs have been the hot spot when it comes to sales.

Here it is important to say: any big sale in the world of real estate funds means a nice drop in prices, since it is a market with little negotiation, in relation to the whole. It is called low liquidity.

To understand this, it is enough to note that, in 2021, until now, while the Exchange moved R$ 7.5 trillion, the FIIs negotiations were equivalent to R$ 56.7 billion. When a multimarket fund sells a few million that it has in a real estate fund, its price is likely to plummet.

And here comes the good news: A scenario very similar to this one was seen in 2016, when the Selic, our benchmark interest rate, had its last big hike. And it was from there that the FIIs took off. From January 2016 to December 2019, the Ifix rose 135%, while the Ibovespa rose 189%.

The Ibovespa is used here solely for comparison, as FIIs are completely different assets from stocks. And the necessary maturation of this market involves understanding the role of each one in its investment portfolio.

While the so-called brick FIIs are investments for the construction or management of real estate, the so-called paper FIIs buy and sell fixed income assets, bonds and securities from the real estate market, such as CRIs (receivables certificates), LCIs (real estate credit bills). ) and mortgage bills.

Understanding the different products and finding how to use market disparities to balance your investments should be a daily task for anyone looking for new opportunities.