Mauá Capital study reveals which real estate fund category performed best in 6 years – 03/05/2024 – De Grão em Grão

When you think about real estate investment funds (REITs), the first thing that comes to mind is investing in physical property, that is, bricks. However, among real estate funds, it was not this FII category that stood out in the last 6 years.

The renowned real estate fund manager Mauá Capital released a study this week that presents the performance of each of the main categories of FIIs over the last 6 years.

To do this, she grouped real estate funds into 3 categories. One of these is related to FIIs that invest only in debt, known as paper funds. Another, from FIIs that invest in brick projects. Finally, the category of funds that invest in the FIIs above, known as Funds of Funds or FoFs.

She compared the performance of these 3 categories with the main Brazilian indices: CDI, IMA-B (index of federal public bonds referenced to the IPCA), IFIX (index of B3 real estate funds) and Ibovespa.

Since 2018, the FII category that presented the best result was Paper. These FIIs invest in fixed income securities. Therefore, they are equivalent to private credit fixed income funds, but traded on the stock exchange. These credits are backed by real estate operations, mainly, in general, the so-called CRIs.

This category has shown better results than Ibovespa, CDI and IFIX since 2018. It lost only to IMA-B.

The last place among the FIIs went exactly to the Brick FIIs. Many who invest in FII believe that because they are investing in brick they have less risk. However, this has not been the case since 2018.

Brick FIIs, on average, were almost unable to overcome the IPCA variation in the period. I emphasize that the performance presented below considers, in addition to the dividend gain, also the capital gain.

In the Brick category, the manager still breaks down into six other segments. Among them, Logistics was the one with the best performance. FIIs in this segment invest in logistics warehouses that are generally rented to large retailers.

The worst segment in the Brick category was FIIs that invest in corporate buildings, that is, FIIs that own commercial rooms that are rented to companies. This segment was most affected by the cultural shift to working from home caused by the 2020 pandemic.

Category/index	Return since 2018
IMA-B	56.20%
Paper FIIs	54.00%
IBOV	52.60%
FIIs FoF	46.30%
CDI	43.40%
IFIX	40.40%
Brick FIIs	36.70%
IPCA	32.60%

The table above shows the performance of FII indices and categories.

Investing in real estate funds is not a consensus among investors. There are those who love and those who hold grudges.

Among all, it cannot be denied that FIIs had an exceptional performance between 2016 and 2019. During this period, interest rates in Brazil showed a sharp drop. At that time, the Selic fell from more than 14% per year in 2016 to less than 5% in 2019.

Many who were disappointed with the product invested between 2020 and 2022. In other words, precisely during the period of high interest rates.

Currently, we are experiencing a downward movement in interest rates similar to the cycle from 2016 to 2019. This movement raises hopes that the strong appreciation of FIIs will occur again. This is a non-negligible possibility. However, there are still risks and it is necessary to know how to choose between categories and segments to obtain better results.

I reinforce that investing in FIIs, like any real estate investment, has risk and must be aligned with the investor’s risk profile.

Michael Viriato is an investment advisor and founding partner of Investor’s House.

Speak directly to me via email.

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