While some investors may be discouraged by the drop in shares due to the increase in the Selic rate, those focused on the long term can take advantage of the discount to go shopping (Photo: Flávya Pereira/Money Times)
It is not news that the increase in the Brazilian basic interest rate, the Selic, tends to benefit new fixed income securities and harm variable income assets. In the case of real estate fundsit is no different.
Even before the interest rate cut was confirmed, on September 18, the shares of a large part of the FIIs on the Brazilian stock exchange fell, anticipating the Central Bank's decision.
But, instead of looking at the drop in shares with concern, investors can look at the scenario from another perspective: that of finding good opportunities, assesses the head of real estate funds at Water True InvestmentsGabriel Pereira.
According to him, the negative trend in real estate fund shares due to the rise in interest rates “is temporary”.
Furthermore, he highlights that it is in moments like these that investors focused on the long term find the best entry prices for FII shares.
“Today, practically the entire real estate fund market trades below its fair value. It is at this moment that the investor should be looking more at real estate funds and have the peace of mind that the share price is transitory”, said Pereira in Market Tour programdo Money Times.
Real estate funds: how should investors act at this time?
In this sense, Pereira gave recommendations on what to do for two types of investors: those who are already positioned in real estate funds and those who want to try this asset class.
For investors who already have real estate funds in their portfolio, the head of FIIs highlights that moments like this, when shares fall, can bring uncertainty when seeing the equity devalue while fixed income gains attractiveness.
“The volatility of real estate funds is lower than that of shares, but higher than that of fixed income,” he recalls.
However, despite this natural insecurity when faced with a devaluation of assets in the portfolio, Pereira recommends that this investor look for “distortions in the market”.
That is, looking inside your own portfolio and assessing whether the real estate funds that showed falls in shares had reasons for doing so or whether the market failed to price in an event that could generate capital gains in the future.
If the decline presents itself as an opportunity, Gabriel Pereira recommends that investors increase their positions in these funds. Otherwise, he states that investors should not be afraid of “realizing the loss” and seek other opportunities among the almost 500 real estate funds listed on the Brazilian stock exchange.
For investors who do not have real estate funds in their portfolio, the head of Acqua Vero recommends entering “calmly” to better understand how the market works.
“I recommend starting with the most liquid assets, most traded on the stock exchange, and not just looking at the dividend yield when putting together a portfolio. It is important to understand the credit risk and maturity of contracts very well, and to gradually increase positions. And understand whether you can withstand the volatility. At this time of rising interest rates, shares may experience negative movements. But the moment is attractive to start buying.”
Where are the opportunities of the moment?
In both cases, the head of real estate funds at Acqua Vero Investimentos highlights the importance of investors having a team of qualified professionals to help them identify good opportunities in the market.
Still on the current opportunities, Gabriel Pereira highlights that the quotas of brick backgrounds showed sharper falls with the rise in the Selic rate, especially those who invest in corporate slabs.
In short, brick FIIs are those that invest directly in physical properties (for example, shopping centers, corporate slabs and logistics warehouses).
“It is the segment that presents the biggest discount on the equity value”, says Pereira.
However, he highlights that the discount on the equity value is not always a sufficient reason to invest in a real estate fund.
“It is one of the items that the investor should look at, but (it is important) to understand more deeply if the asset is going through any problems. The discount is not always attractive, we have to look at more criteria to make the decision”.
On the other hand, the segment of real estate funds that “feels the least” the increase in the Selic rate are the Paper FIIs – that is, those who invest in fixed income securities backed by the real estate sector, such as:
- Real Estate Credit Letters (LCIs);
- Real Estate Receivables Certificates (CRIs).
“In the scenario we are seeing now, post-fixed assets can make a lot of sense for the portfolio. If you have a movement of rising interest rates or rising inflation, post-fixed credit funds tend to deliver a higher dividend at the end,” explains Pereira.
Real estate funds have the advantage of 'fat' dividends and are exempt from income tax
In addition to the discount on the value of the shares and the possibility of earning capital with the appreciation thinking about a longer term, another advantage of real estate funds is the “fat” dividends.
This is, in fact, one of the main reasons that lead investors to invest resources in FIIs since, in addition to the yields high, this asset class offers income tax-free returns.
“It is a good time to buy discounted shares, receive the income, reinvest this income in new shares and be calm when making the final allocation, understanding that the share fluctuates, but that it is an asset that is an excellent long-term strategy”, advises Pereira.
To watch the full interview with the head of real estate funds at Acqua Vero Investimentos on Market Tour programit just is click here or in the player below: