The war between Russia and Ukraine put pressure on the rise in commodity prices (raw materials such as oil and grain) and affected the volatility of international stock markets. As a result, we are already working with a generalized price increase, passing through the countryside, through the fuel pumps, to the basic food basket and industrial production. The scenario raised the possibility of stagflation, a combination of high inflation and stagnant production.
With this, analysts began arguing that, in addition to commodities and precious metals (like gold), real estate funds (REIFs) also have the potential to appreciate in value and therefore should gain ground in investors’ portfolios. See below how to invest in FIIs in this high interest rate scenario, according to experts heard by. UOL.
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Gustavo Asdourian explains that as with all other variable income products, large fluctuations such as the rise in inflation and high interest rate policy, which are used as a tool to stop the rise in prices, have direct effects on real estate investment funds (FIIs). Co-founder of Guardian Gestora.
FIIs have a direct relationship with inflation and Selic. This is because both their rents in the case of brick funds and the rates applied to loans in the case of paper funds are indexed by inflation indices such as the IPCA or IGP-M.
brick and paper
Paper funds invest equity in fixed or variable income products in the real estate market such as CRIs, LCIs (Real Estate Letters of Credit) and LHs (Mortgage Letters) and distribute at least 95% of net income to clients. investors.
It’s all about brick backdrops, physical properties anyway. These FIIs are traded on the Stock Exchange and are an alternative for those wishing to invest, for example, in shopping malls, logistics warehouses and corporate buildings.
While Selic is on an upward trajectory, more fixed-income funds like brick tend to show a decline in share price so the percentage of dividends distributed represents a larger gain relative to the value of the shares. The partner at Guardian Gestora explains the new Selic.
On the other hand, paper funds with CDI or IPCA-linked assets with monthly adjustment are more resilient in this scenario as they have managed to increase their dividend distribution.
Earnings with dividend
In FIIs, semiannual or monthly dividends from real estate funds paid to shareholders are often referred to as dividends from rentals of managed properties or income from fixed income securities in the real estate sector in which they can invest. Like CRIs.
They represent an additional return on investment and are exempt from Income Tax, which allows the shareholder to catch or even exceed inflation, depending on the fund and the manager’s strategy.
According to Asdourian, the current levels of inflation in FIIs bring greater realignment of lease agreements and also increase the interest charged on CRI (Real Estate Receivables) installments. Both situations positively affect the dividend distribution.
A survey by the Economática consultancy shows the top ten performers of FIIs in the first quarter of 2022 (including reinvestment of revenues received).
investor protection
Gustavo Messerlian, partner of Brio Investimentos and portfolio manager of Brio Multiestratégia, points to FIIs as a way to protect investors, particularly CDI and IPCA indexed receivables funds, which have the ability to reflect this inflation and interest to investors as follows. dividends. But he says you should be careful before investing.
“It is important to perform a rigorous analysis of both the credit of receivables and the creditworthiness of each borrower in the portfolio. Not just before investing, but throughout the investment period,” he declares.
Saying that it is important for the investor to follow the monthly reports and all the materials presented by the managers for this, the expert says, “By paying attention to the risks, the framework and the period.” [prazo médio no qual o detentor de um título pré-fixado irá recuperar o investimento feito ao adquirir o papel] of each asset and fees for the fund as a whole”.
Messerlian also states that the investor should analyze the payment characteristics (whether it pays monthly interest) and general information about the fund such as management fees, management turnover capacity, dependency on turnover each month, profit reserves. It is also important to monitor whether the fund is operating with leverage, high indebtedness.
Another point that investors should pay attention to is the type of FII: paper or brick. According to Caio Braz, a partner at Urca Capital Partners, paper funds in general have a faster probability of monetary correction transfer than brick funds.
Funds in this class with allocated portfolios at nominal rates above IPCA + 5% should already be able to pay dividends over 10% per year.
Paper funds clearly benefit from the current scenario, as uncertainties, especially war and political instability, put pressure to sustain high inflation and high interest rates.
“Given that their dividends depend on these indices, such a scenario reflects greater returns to their shareholders. Likewise, atypical contracts that have the power to beat all these inflation indices and do not carry the risk of gaps. [imóveis vagos] It is also a good alternative during the rental period. [Isso porque] “Bring solid dividends that are hedged against inflation even in the face of so much uncertainty,” says Asdourian.
keeping an eye on the potential of the asset
Rafael Ohmachi, director of RB Asset, says one of the reasons FIIs are highly attractive is the high dividends they pay.
According to him, large real estate funds allow valuation above inflation. Although this is a prominent situation in investments in real estate funds, it is due to gains from two main sources, not the Income Tax exemption. These are: the monthly rent paid by the lessee (which results in monthly or semi-annual dividends paid by the FIIs to shareholders) and the appreciation of the asset as leveraged by greater demand.
“At certain times, this asset valuation even exceeds the return on rent, so it’s important to choose the best properties in the best location,” Ohmachi says.
Why should you invest in FIIs?
It is worth remembering that the FIIs are going through turbulent days. At the start of the epidemic, the performance of real estate funds in March 2020 worried investors. Now, the moment is very different, according to Daniel Pinheiro, CEO of JPP Capital. “Funds have suffered a lot with the pandemic, but I think the worst is over,” he says.
According to Artur Losnak, head of TC FIIs, investors are finding ways to mitigate risks should there be a recovery in the economy.
Some FIIs are contractually protected against inflation and allow automatic transfers in a more challenging environment. If the economy improves, he says it’s possible to allocate them to physical assets such as shopping malls and corporate buildings.
Lucas Costa Araújo, director of FII management at AF Invest, is categorical in assessing the potential of FIIs. For the expert, this is an asset class that will stay in investors’ portfolios.
If you look in the rear view mirror, the dividend yield [indicador que mede o desempenho de um investimento em relação ao quanto ele paga de proventos ao cotista] 11.75% of SIEFs have not become more attractive, but still good products with Selic. This is because we are talking about a good yielding real estate asset class that does not need to be above the Selic ratio. However, looking at the long-term horizon, it can be beneficial for the investor with the reorganization of the contracts.
Lucas Costa Araújo, director of real estate fund management AMNESTY investment
source: Noticias
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.