paper real estate funds may be the option – Investments – Estadão E-Investidor – Main financial market news

Paper real estate funds were the only ones in the segment that had a positive performance in the year, according to a survey by Teva Indices. From January to November 15th, this class had a performance of 4.5%, while the other brick funds closed with a drop of more than 8% during the same period.

According to analysts, this type of FII that invests in credit bonds is able to transfer the value of inflation easier than others in the same class, which make them more attractive at this time of high inflation.

“Most of the contracts are indexed to an interest rate and an index of monetary correction. And this correction takes place in one to two months” explains Gabriel Teixeira, real estate fund analyst at Ativa Investimentos. Monetary correction, cited by Teixeira, can occur either by the National Consumer Price Index (IPCA) or by the General Market Price Index (IGP-M). Both indicators remain high in the last 12 months.

According to data from the Brazilian Institute of Geography and Statistics (IBGE), the IPCA corresponded to 10.67%. The IGP-M reached 27.7% during the same period, according to data from the Getúlio Vargas Foundation (FGV).

For this reason, many investors decided to migrate their resources to paper funds, aiming at greater profitability. And as this transfer, according to Teixeira, takes place over a period of one to two months, the investor is able to have a forecast of its return. “There is this lag of two months or so. As we are still having months of high inflation, in the short term this distribution will still be very attractive”, he points out.

For brick funds that invest in building leases, this process is slower because lease contracts cannot be readjusted by a similar or lesser interval.” You have other real estate issues. Sometimes, you are not able to transfer all the inflation to the tenant and the tenants have more room for negotiation”, adds Teixeira.

Lucas Reis, a partner at Portofino Multi Family Office Real Estate, explains that paper real estate funds had low default rates over the past few months, which further reinforced the sector’s attractiveness. “During this period, there was no type of default (default) or they have not yet been reflected. Therefore, they continued to pay dividends at the same level as before”, he points out.

Return of real estate funds by segment according to Teva Indices

indexesReturn in 2020Return from January to October 2021Return from January to November 2021*
Paper REIF Index-0.9%5.6%4.5%
Broad REIT Index-10.3%-5.9%-8.3%
FIIs Corporate Lajes Index-22.2%-13.3%-17.3%
FII Shoppings Index-16.8%-11.6%-15.7%
Hybrid FII Index-11.4%-9.4%-11.9%
Brick REIT Index-14.0%-12.0%-15.2%
Logistics FII Index-8.7%-11.8%-15.8%

*Year-up to the 15th of November 2021/Source: Teva Indices

Where and even when to invest

Although paper funds are more resilient to market volatilities, investors need to be selective when choosing which fund to invest. Marcos Baroni, chief analyst for real estate funds at Suno Research, cites the importance of analyzing the funds’ history before investing funds. “Look for funds that have good histories and that have the ability to build a portfolio that balances risk/return well so as not to be exposed to high-risk assets”, he emphasizes.

Ricardo Figueiredo, a specialist in real estate funds at Spiti, also points out the importance of choosing the fund when buying. According to him, when investing in paper funds, the investor must divide the share of the fund’s market value by the equity share.

If the result of this division is less than one, it is because it is a good investment. “This is my reading. Therefore, I would never buy a paper fund with a result of 1.10 because it is as if you were paying R$110 on a R$100 bill”, he explains.

But this greater exposure to paper funds should continue until the first months of 2022 due to the expectation of the end of the increase in interest rates and also of inflation. “The recommendation is to take advantage of the moment and select good assets with reasonable prices, given the expectation that this movement of interest rate increases should end in 1Q/22”, evaluates Luiz Sedrani, Management Director of BV Asset.

However, Reis says that investors also need to have exposure, even to a lesser degree, to brick funds because they are investments with medium to long-term returns. Also, ticket prices are very low from the market value, which can mean a good moment for investment.

About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

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