Infrastructure fund quota holders triple since 2021 – 03/19/2023 – Market

Over the past year and also during the first months of 2023, an investment category that is still little known in the Brazilian market has begun to fall in favor with investors.

Infrastructure investment funds (FI-Infra), which invest in incentivized infrastructure debentures, have seen the number of shareholders more than triple since the end of 2021.

Data from the TC/Economatica platform indicate that, in December 2021, the FI-Infra class totaled around 26.6 thousand shareholders, a number that rose to 81.5 thousand in March 2023, an increase of approximately 206% in the interval.

On the same basis of comparison, the assets managed by these funds increased 20%, from R$ 4.85 billion to 5.79 billion.

Having their quotas traded on the Stock Exchange just like a share or a real estate fund, infrastructure funds have the advantage of offering individuals tax exemption both on income distributed periodically and also on capital gain, in case the investor sell the fund for a higher amount than he bought.

Incentivized debentures are private fixed-income securities exempt from IR (Income Tax), issued by companies to finance large infrastructure works in sectors such as electricity, transport and sanitation.

To arouse the interest of investors, debentures need to offer a return higher than the rates of public bonds issued by the government, which today pay real interest above 6% per year, in the case of papers indexed to inflation.

According to Victor Tâmega, credit and fixed income manager at Rio Bravo Investimentos, it has been possible to find incentivized debentures indexed to the IPCA (National Broad Consumer Price Index) on the market, with rates that vary between 7% and 10% per year, depending on of the risk of the company issuing the bonds and of each project.

In June 2022, Rio Bravo launched the RBIF11 infrastructure fund, which on Friday (17) was trading at BRL 99 on the stock exchange. The fund has assets of approximately R$30 million, with an average rate of return of IPCA plus 8.25% per year.

The Rio Bravo fund, which charges a management fee of 0.80% per year, is classified as IS (sustainable investment) by Anbima, with a mandate to invest in green projects, such as wind farms and solar generation.

The fund also holds a marginal stake, around 1% of the portfolio, in Light debentures. Rio Bravo’s assessment is that the market had an exaggerated reaction towards the company, perhaps because the Americanas case is still very recent in investors’ minds.

“The infrastructure sector is going to continue thriving, as it has been in recent years. Several projects that were auctioned in previous years should come to market”, says Tâmega.

More recently, on the 14th, the São Paulo government held an auction for the northern section of the Rodoanel, which was won by Starboard.

Between 2021 and 2022, auctions for ports, airports and highways were also held, with investments contracted to carry out the works of a few tens of billions of reais, estimate market managers.

Questioned about the forecast of investments contracted based on the last auctions held, the Ministry of Infrastructure did not return until the publication of the report.

Managers launch new funds indexed to the CDI

In addition to attracting more and more investors, the infrastructure fund category is also beginning to attract managers interested in launching new funds.

Today there are 12 infrastructure funds listed on B3, one of the most recent being SNID11, from Suno Asset, launched in February 2023, with BRL 35 million in equity and a management fee of 0.95% per year. On Friday (17), the fund was quoted at BRL 100.75 on B3.

Director of investments at Suno Asset, Vitor Duarte says that, instead of having the IPCA as an index, the new fund will bring something new to the category, adopting the CDI as a reference index.

As the incentivized debentures are issued with the price index as index, Suno Asset will buy the shares and, through derivative contracts traded on B3, change the benchmark to the CDI.

According to Duarte, the decision stems from the fact that the CDI has historically had a lower volatility than the IPCA. “With this, the strategy will result in a distribution of earnings that is also more stable, without shocks from one month to the next”, says the specialist. The fund’s target return will be CDI plus 2% per year.

The manager Sparta Fundos de Investimento, in turn, which already has an infrastructure fund dedicated to incentivized debentures indexed to inflation since December 2021, the JURO11, also launched in February a fund that will have the CDI as a reference index.

Sparta’s new fund, CDII11, has around R$30 million in equity and has a management fee of 1% per year. The return target will also be CDI plus 2% per year.

Sparta analyst, Caio Palma also says that the lower volatility of the CDI compared to the IPCA was the main motivation that led the manager to choose to launch the new fund. “We received demand from a number of investors for a fund indexed to the CDI.”

Palma says that the fund has already been listed on the Stock Exchange, but still needs to meet a 90-day deadline to start trading because of rules established by the CVM (Securities Commission), which should occur in mid-May.

The Sparta analyst says that the moment is very attractive in terms of remuneration for managers to invest in private securities, either because of the recent rise in interest rates by the BC (Central Bank), or because of the problems involving companies like Americanas and Light.

That’s because, with a series of investors seeking to dispose of credit bonds in the market at the same time, they need to sell the papers with a higher rate of return than the recent average to be able to find buyers, says Palma, who points to the interest around 8% per annum of debentures as a good opportunity to lock in a significant gain in a long-term window, since these are securities that usually have a maturity of over 10 years.

“We are seeing a very large pipeline of infrastructure ahead of us. We had auctions in past years for ports, highways, power transmission, and we will probably have a relevant number of offers”, says the Sparta analyst, who cites Equatorial and Energisa among the issuers that had securities recently acquired by the fund.

Duarte, from Suno Asset, adds that, according to the FI-Infra rules, the funds have a period of up to 180 days to reach an exposure of two thirds of the portfolio in incentivized debentures, with the remaining third free to invest in other income securities fixed. After two years, this space for assets other than incentivized debentures drops to 15%.

Until then, managers are free to invest in fixed income securities that are not necessarily incentivized debentures. For this reason, says Duarte, the first 12 investments made by SNID11 so far were in conventional debentures, which usually offer a higher rate of return than those encouraged.

Debentures of companies such as car rental companies Localiza and Movida, sanitation company Aegea and 3R Petroleum, oil and gas, were acquired by the fund with a real interest rate of around 8% in addition to inflation. “We like diversification, and I want to have as many sectors in the portfolio as possible.”

Rodoanel financing arouses interest of managers

The northern section of the Rodoanel, the last stage of the ring road that surrounds São Paulo, which was auctioned on the 14th, is a business that, if it seeks financing in the market via debt securities, tends to arouse great interest in the market.

Both the manager of Rio Bravo and Suno say that if incentive debentures reach the market to finance the conclusion of the work on the North section of the Rodoanel, they should invest in the bonds.

“Without a doubt, it arouses interest. The works are in a region with a well-known and resilient vehicle traffic, and which has a strong economic strength in the state of São Paulo”, says Tâmega, from Rio Bravo.

He adds that, given the level of investment needed to complete the last stage of the ring road, of BRL 3.4 billion, “very likely” in the coming months, issues will reach the market to finance part of the project. “But, for us to be interested, it is very important to evaluate the environmental aspects, if all the licenses will be issued.”

Along the same lines, Duarte, from Suno Asset, also says he would be interested in issuing debt securities related to the construction of the Rodoanel. “It would certainly arouse interest. We are talking about a road project in the main city of the state with the highest GDP in the country, which should have a very large flow of vehicles”, says the manager’s investment director.