Understand what paper funds are and why they earn from a high Selic rate

The new increase in the basic interest rate promoted on May 4 by the BC (Central Bank) highlights, even more, the opportunities offered at this moment by fixed income securities.

Post-fixed securities traded at the Direct Treasury that follow the Selic fluctuation, as well as funds with a conservative profile of the DI type and CDBs of large financial institutions are among the main alternatives pointed out by specialists within the class.

In addition to the more traditional options on the market, real estate funds that invest in CRIs (Certificates of Real Estate Receivables) have also been able to take good advantage of the tightening process in monetary conditions to curb inflation.

What are paper funds?

Known in market jargon as paper funds, the strategy of these products basically consists of managers allocating the funds raised from investors in certificates, private fixed-income securities somehow linked to the real estate market.

These bonds are usually indexed to the IPCA (Broad Consumer Price Index), to match the long-term horizon of the projects, or the CDI, more common in operations linked to shopping malls and shopping centers in general.

According to Brunno Bagnariolli, partner responsible for the real estate business area of ​​the asset manager Mauá Capital, paper real estate funds tend to perform better over time than their peers in the sector.

How does the income of these funds compare with that of others?

A study carried out by the manager sought to carry out a semi-annual analysis since 2018 in which it compared the average performance of the FIIs market with that of the main “high grade” or investment grade receivables funds, which invest in securities of companies with good ratings. of rating.

Survey data indicate that, in most cases, when the real estate fund market as a whole has a positive performance, paper funds perform better than average.

The study considers both the valuation of selected funds, as well as the periodic distribution of dividends characteristic of the category.

On the other hand, when real estate funds generally have a loss phase, those investing in CRIs again end up doing better than their peers.

Bagnariolli says that, in times of greater risk appetite, paper funds end up benefiting from the migration of investors to alternatives that provide a higher yield for the portfolio. This is the case of variable income, a class in which real estate funds are found, whose shares are traded on the stock exchange just like a share.

​How does inflation and Selic affect paper funds?

In more conservative scenarios, which are usually accompanied by interest rate hikes to control high inflation, receivables funds are able to navigate well because the securities they invest in are indexed to the CDI or IPCA, says Bagnariolli.

“The rise in interest rates and inflation directly impacts the distribution of dividends from receivables funds, attracting greater interest from investors, which generates buying pressure and secures the price of shares in moments of uncertainty”, says Mauá’s partner, manager in front of the “Mauá Capital Receivíveis Imobiliários” fund.

The fund’s proposal is to deliver an average return to investors via the payment of dividends of 1% per month, with a “dividend yield” (ratio between the dividend paid and the value of the fund’s share) of 12.8% per year in March 2022. Income paid by FIIs from CRIs is exempt from Income Tax (IR).

Among the CRIs in the portfolio, there are papers with a real return of 7% per year linked to logistics warehouses in the Cajamar region, in São Paulo, or indexed to the CDI and plus interest of 5% per year, in the case of CRI Sam’s Club .

Brokers reduce minimum investment and change strategy with high Selic

Founding partner of Guardian, Gustavo Asdourian says that, after having promoted in early March a break-up of the shares of the real estate fund “Guardian Multiestratégia Imobiliária I”, the minimum investment went from approximately R$ 100 to around R$ 10.

This came after the broker saw an increase in investor interest in paper funds over the past two months.

Asdourian says that the measure was taken in order to allow a greater number of people to be able to buy shares in the fund, without having to pay large amounts to do so.

“Since then, the fund’s shareholder base, which was made up of just over one hundred investors, has jumped to almost 1,500, which demonstrates the high level of interest of the general public in the strategy”, says the manager’s partner, adding that a good part of the newcomers investors have less than ten shares of the fund, which shows, according to Asdourian, the importance of the democratization of investments.

Guardian’s fund portfolio is mainly composed of CRIs indexed to the IPCA with an average term of 4 years and real interest rates, that is, above inflation, between 5% and 8% per year.

Asdourian says that the certificates have as counterparty companies with low credit risk, such as BRF and Pão de Açúcar, which issue the bonds to finance lease contracts for logistics warehouses or supermarket chain stores.

According to the manager, a change in the composition of the fund’s receivables portfolio is expected for the coming months.

“As the Selic rate reaches the peak forecast for the current monetary tightening cycle of around 13% per year, and makes inflation begin to subside, our intention is to sell some more liquid CRIs indexed to the IPCA and replace them with certificates that accompany the CDI”, says the Guardian partner.

The expectation is that CDI-indexed papers will represent around 40% of the FII Multiestratégia portfolio by the end of the year.

Partner responsible for the credit area of ​​the manager Brio Investimentos, Victor Moura says that, given the low interest rates practiced by the market during the last year, the strategy adopted by the house was to reduce the search for new real estate projects to be financed through CRIs.

At the time, the interpretation made by Brio’s partners, says Moura, was that it was not worth competing with the big banks in the offer of credit to companies in the sector, given the level of rates in the market with the Selic close to historic lows. .

“With the Selic now at 12.75% per year, the posture of credit release by banks is more restrictive, which opens space for managers to act by financing operations with difficulties in raising funds”, says the partner of Brio.

In October last year, the manager raised around R$ 60 million, when it started to offer strategies aimed at the retail public through the Brio Multiestratégia fund. Until then, the house’s funds were of a more daring profile and aimed only at investors with more than R$ 1 million in financial investments.

Among the positions carried in the portfolio, there are CRIs such as “HBR Habitasec”, indexed to the IPCA and interest of 6.15% per year, backed by lease agreements signed with Decathlon, Tim and Pirelli, and “Shopping Sul Planeta” , whose index is the CDI plus interest of 2.6% per year, based on the operations of Shopping Sul, located in Valparaíso de Goiás (GO).

Moura says that the manager has a volume of close to R$ 200 million in cash to allocate to real estate projects and that she has felt a growing demand from construction companies and developers who need liquidity to carry out the works and face difficulties in obtaining financing.

Operations structured through CRIs that offer a rate of return between 8% and 10% per year, plus the variation of inflation in the period, are on the radar.

The manager’s partner states that, with the Selic low last year, many companies in the sector began to prefer to make funding indexed to the CDI instead of the IPCA, without paying attention, however, to the risk that a rise in interest rates could represent for the business.

“Companies that chose to raise funds in CDI at a time when the Selic was low have gone to the market in an attempt to change the index to the IPCA.”