Brazilian real estate funds have seen a record start to the year. Liquidity levels reached their highest ever and average daily values during January and February registered record highs. Individual investors have flocked back to the fund sector. Analysts believe the upward tendency will continue for at least another two years.
The reasons for the renewed interest in Brazilian real estate funds are two-fold. Firstly, the property market is being boosted by improved economic conditions and secondly, Brazilian interest rates currently stand at their lowest ever. The combination of lower returns from banks and high demand for property is driving interest in funds.
Record liquidity at start of the year
The Brazilian stock exchange reports record liquidity levels so far this year. The number of listed portfolios in February was the highest ever as was the monthly volume of more than R$1 billion.
Both January and February registered record business and daily averages. February saw around 250,000 operations every day with an average value of R$46.6 million. This amount runs well ahead of the previous daily record of R$32 million in 2013.
Big demand for Brazilian real estate funds
According the National Association of Entities for Financial Markets and Capital (Anbima in Brazilian), demand for real estate funds has “never been so hot”. In February, there were five offers of new funds with a total value of R$1.6 billion, the highest monthly figure since June 2015.
February also saw a big increase in the number of participants in Brazilian real estate funds. The total of 133,600 was up 6.22% on those in January, a month that registered a growth of 7.96% on December. In February there were 141 listed portfolios, 1% more in the year and also a record.
Big year for Brazilian real estate
2018 in property funds appears to be following the trends set in 2017. The Real Estate Fund Index (Ifix in Brazilian) grew by 19.42% last year. By mid-April this year, the Ifix had already seen an increase of 5.37%. The Index reached 2,362 points on 6 April, its highest ever.
Funds are currently seeing huge interest from investors, following the trend set last year. In November, the Rio Bravo Renda Corporativa fund attracted R$141 million, 140% more than necessary for its launch.
This year, the Hedge Top 3 fund, part of Hedge Investments, launched an initial offer of R$100 million in February. Demand more than doubled this figure as the fund pulled in R$220 million from interested investors.
Individual investors return
Brazilian real estate funds have traditionally attracted individual investors in a much higher proportion than institutions. In 2015 and 2016, this trend was reversed. However, the recent surge in economic growth has seen a return of private investors to the market.
At the end of 2017, 61.6% of participants in new real estate funds were private investors compared to 31.4% at the end of 2016. In March, individual investors accounted for over 75% of acquisitions of the 13 offers launched in the month.
Stock market analysts believe this trend is here to stay. Quoted in the Brazilian financial publication Valor Economico, observers claim that growth of investment in Brazilian real estate funds always anticipates “profitable times”. They predict that this trend will last for at least two years.