If the market of real estate investment funds (REITs) could be compared to a game, the best choice would certainly be Pac-Man. The classic yellow glutton character would represent managers and investors, who navigate a labyrinth in search of assets to satiate their hunger for income.
The problem is that, just like in the famous game, there are also a series of ghosts along the way that disrupt investors’ lives. Here in Brazil, these little monsters arise mainly from the political and fiscal tensions — and Brasília, unfortunately, is a machine to generate noise.
Despite President Jair Bolsonaro’s retreat from attacks on the Supreme Court (STF) has calmed, at least temporarily, the crisis between powers, the approach of the elections – which promise to be polarized again – is closely followed by the escalation in the tension between Bolsonaro supporters and the opposition.
In the tax field, questions about the payment of the invoice of BRL 90 billion in precatorys still hang over the market. Congressional leaders are running out of time to pass a Constitutional Amendment Proposal (PEC) aimed at resolving the impasse, but government officials complicate negotiations by advocating the inclusion of yet another round of emergency aid in the text.
Selic chases the REITs
In addition, the current Brazilian basic interest rate hike cycle it also unleashes its own ghosts over the sector. With inflation moving further and further away from the Central Bank’s target — the previous measure by the IPCA-15 accelerated again and reached 1.14% in September and has already accumulated an increase of 10.05% in 12 months —, the institution does not hesitate in tightening monetary policy.
In its last meeting, the Copom raised the Selic from 5.25% to 6.25% per year and already warned: at the next meeting, scheduled for this month, a new increase of one percentage point is already contracted.
According to the latest edition of the Focus Bulletin, the rate should end the year at 8.25%. A month ago, the expectation of economists was 7.63%. The forecast for inflation, which has been rising for 26 consecutive weeks, was 8.51%.
With all these ghosts coming together, it was difficult for the FIIs to capture any appreciation in September. O IFIX, an index that measures the behavior of the most traded Real Estate Funds on the Stock Exchange, ended the month with a 1.24% indentation.
The fall was smaller than that registered in August, but still contributed to deepening the negative performance of the indicator in the year, which has cumulative decrease of 5.38%.
With this scenario, none of the FIIs segments was able to guarantee an increase for investors, with emphasis on the fall of 3.32% of shopping mall and retail funds.
|Segment||Profitability in September|
|real estate receivables||-0.39%|
|Funds of Funds||-3.26%|
However, not all is bad news for FII enthusiasts: the income that real estate funds must distribute still surpassed the benchmark interest rate. Currently, the dividend yield — an indicator that measures the return on an asset from the payment of dividends — of the IFIX is at 7.98%.
|Segment||Annualized dividend yield|
|real estate receivables||11.28%|
|Funds of Funds||9.51%|
Discover the preferred real estate funds for October
Although the Selic increase scares the sector, not all FIIs fear the interest rate hike and some may even profit from the scenario. This is the case of the brokers’ favorite for October, again the VBI CRI (CVBI11).
With four recommendations – remaining in the top three of Guide, Necton and Santander and inclusion in the favorites of Ativa Investimentos -, the fund occupies first place on the podium for the third consecutive time.
Those who followed our nomination last month saw the FII retreat 0.50%. Despite being negative, the result is still far from the 1.24% drop in the IFIX in the period.
The second position was again tumultuous, with a triple tie between Bresco Logistics (BRCO11), Real Active TG (TGAR11) and Value RE III (VGIR11), with two recommendations each.
Check out the three preferred funds of each broker among those indicated in their respective recommended portfolios for October:
VBI CRI (CVBI11) — surfing on high interest rates
Amid high inflation, the third consecutive appearance of the VBI CRI (CVBI11) at the top of brokers’ nominations is no surprise to anyone who knows the core characteristics of their portfolio. While the breath of the inflationary dragon frightens many investors, those betting on the nomination champion could profit from rising prices.
The reason for this is that VBI CRI is a fund that invests mostly in Real Estate Receivables Certificates (CRIs), Mortgage Bills (LH), Real Estate Credit Bills (LCI) and Guaranteed Real Estate Bills (LIGs), asset classes whose yields can be directly linked to high inflation and interest rates.
To get an idea of the impact of the indices, 68% of the fund’s portfolio is made up of bonds indexed to the IPCA and 32% by bonds linked to the CDI. With a portfolio comprising 35 assets, the average allocation rate is: IPCA + 6.9% and CDI + 3.5%.
According to Santander analysts, these percentages lead to attractive earnings projections. “We estimate that [o yield] stay at 10% over the next 12 months”, highlights the bank’s report.
The fund’s portfolio is considered diversified by brokers, despite its concentration in the Logistics, Subdivision and Residential sectors, which account for 68% of total investments. Check the allocation percentages by segment below:
- Logistics (26%);
- Allotment (21%);
- Residential (21%);
- Shopping (14%);
- Timeshares (7%);
- Educational (6%);
- Retail (5%).
Santander points to this concentration as a risk factor, but ensures that the product follows a well-structured credit policy by the manager. The bank states that, with the resources of its sixth issue of shares (R$330 million) the fund “will be able to further diversify the CRIs portfolio and take advantage of better opportunities in structured operations”.
The operation, approved in mid-September, will be carried out with a subscription price per share of R$100, subject to update. For more news, follow the CVBI11 market announcements page.
See also the most promising funds for the rest of 2021. Check out the video below (and take the opportunity to follow the Seu Dinheiro channel on YouTube to receive more content like this):
Retrospective — few were saved
With the number of ghosts getting in the way of the REITs in September, most of the assets indicated by the brokerages fell badly. The negative highlight was the Mahogany Bottom Fund (MGFF11), who led the tip of the falls with recoil of 4.15%.
On the high side – which were few, with only six FIIs noting gains in the period -, the most expressive was that of 2.17% of BR Structured Real Estate Credit (RBRY11). See the table below for the performance of all top 3 funds from brokers in the past month: