Private credit funds lose BRL 17 billion in 2023 – 03/05/2023 – Market

Previously considered a good option for investors, with attractive returns above inflation, funds that have securities issued by companies, or private credit, suffered net redemptions of BRL 17 billion in the first two months of 2023.

These funds had a net withdrawal, that is, the difference between investments and redemptions made in the period, of R$ 5.1 billion in January and R$ 12.2 billion in February.

The information is contained in a report prepared by the ABC Brasil bank and puts a magnifying glass on a trend that was already being noticed by the market after the Americanas case, in January.

The survey takes into account the exposure to debentures of each fund. Therefore, if a fund has 10% of its portfolio allocated to this type of security, redemptions will be calculated considering this proportion.

Debentures are securities usually issued by large companies, which in practice represent a loan made by investors.

According to Roberto Dumke, one of the analysts who signed the ABC Brasil report, there is a perception that the scenario for large companies is much more complex than an isolated case of accounting inconsistency.

“This shows that the Americanas case, when we deal with the financial situation of companies, is not that isolated. Managers see a more difficult scenario. So much so that the rates asked to buy securities on the secondary market are on the rise”, says Dumke.

The secondary market is the direct negotiation environment between market agents, such as funds and investors, without the participation of the companies that issue the bonds.

Premiums consist of fees paid in addition to the indicator that serves as the basis for paying interest to the buyer, most often the CDI, which is linked to the basic interest rate.

According to the ABC, the premiums of the 25 most traded securities in the last six months up to the end of February rose from 1.80% per annum in December to 2.61% per annum in February.

This leads to a decrease in the value of securities, which quickly affects the shares of investment funds that have these securities in their composition.

According to information from ABC Brasil, Light’s bonds had significant drops in their prices, after news about a possible request for judicial recovery.

According to the report, the prices of bonds issued by the energy company fell by up to 70% in the secondary market in February. That is, a Light bond with a unit value of R$10,000 until the end of January was traded in February at R$3,000.

Since the beginning of this year, the funds have been obliged to update the values ​​of the assets that compose them. This movement has the technical name of marking to market. Thus, when there are events such as Americanas or Light, the impact on the value of fund shares is almost immediate.

According to Carlos André, president of Anbima (Brazilian Association of Financial and Capital Market Entities), this new rule underwent a quick test with the Americanas case. It serves to provide greater transparency and equality to the fund market.

“Before, if an investor had access to some information that would only be reflected in the shares some time later, he would redeem it. The others would keep the loss. Now, the information is public and updated daily for everyone”, says Carlos André.

According to data from Anbima, the entire fund industry has a difficult start to 2023. Investment funds had net redemptions of R$ 24.6 billion in January, a number boosted by the Multimarket and Equity categories.

Emissions are virtually stopped

With rising fees in the secondary market, investors are charging high prices for companies that need to finance themselves in the market. This has led to a decrease in the supply of private bonds.

According to the ABC survey, issues of debentures, promissory notes and commercial notes fell from BRL 45 billion in December 2022 to BRL 19 billion in January and to BRL 8 billion in February.

Rede D’Or São Luiz, owner of several large hospitals in all regions of the country, issued R$ 1.1 billion, paying CDI plus a premium of 1.70% per year. It was the biggest company to go public last month.

Some smaller companies, such as Mottu, which rents motorcycles, and the construction company Jota Ele, had to offer premiums close to 5% to make their funding viable.

A financial market executive, who prefers not to be identified, expects an increase in the volume of the subsequent offering of shares as an alternative financing. But only for very well-regarded companies in the market.

This will not be the case, according to him, for companies like Marisa, which recently changed its president and announced that it will try to renegotiate debts that reach R$ 600 million.

Banks also show little willingness to increase the granting of credit in 2023. Itaú Unibanco tripled its coverage against default of large companies during the past year, and its president, Milton Maluhy Filho, advised, during the presentation of the 2022 results, that companies reduce their debt.

Banco do Brasil, which already had a low credit exposure strategy for large corporations, has shown signs that it will continue and even expand this line of action in 2023, giving preference to issues in the capital market.

But, according to Dumke, the banks themselves are insuring the companies’ emissions. “There is no horizon as to when the interest rate scenario will change. Financial expenses are very high, and, sooner or later, the accounts end up not closing.”

For him, it is still difficult to say when the environment will be more favorable.

“It could be a month from now, it could be in the second half. Issues take up to 90 days between their start and the distribution of bonds. Companies need to have some visibility, and that is difficult at the moment”, says Dumke.