May 31, 2023

The analyst says the FII’s “high-yield” compounds are a camper-turned pumpkin after defaults on CRIs; What are they and how to choose

The serial default of Certificates of Receivables (CRI) revealed the true picture of real estate funds of this type High yieldRicardo Figueiredo, fishery specialist, resides in Spiti. In an analogy to fairy tales, it is mentioned that this asset class was surfing the transport wave, but reverted to being a pumpkin in the current scenario.

Figueiredo spoke on this topic during the Tuesday (fourth) edition of the FIIs Universitya program hosted by Maria Fernanda Violati, analyst at XP, Tiago Otoki, economist at Clube FII, and Wellington Carvalho, reporter at Infomoney.

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In the first three months of the year, the real estate funds market lost more than R$7 billion in market value. Part of the devaluation is due to the performance of “paper” fisheries companies, which invest in fixed-income securities linked to inflation and DDI (the main indicator of fixed income) indicators.

Among the assets in the portfolio of this class of fisheries companies is CRI, a tool used by companies in the real estate sector to raise funds in the market. In practice, these companies “package” future income they have to receive – such as rents or premiums for the sale of apartments – into a security and sell it to investors, such as fisheries companies.

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The papers include a stable monthly income and cash return using an index, which is usually a CDI or IPCA rate.

The higher these indices, the higher the fund’s income and, accordingly, the dividends to shareholders. However, the scenario of inflation and high interest rates makes it difficult for a debtor to settle debts related to CRI.

“[É preciso lembrar que] In “paper” funds, there are higher-quality debt (with less chance of default) and richer debt,” he explains. “Most hot debt [e que gera os maiores dividendos] He is the one who seduces investors, but the risk in these funds is also greater,” Figueiredo reflects.

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Given the dynamics, the specialist questions the use of the term High yield For money concentrated in more colorful debt. For him, the market gave a more complicated name to an asset that should simply be called “riskier.”

“I usually say the fairy godmother played magic and turned pumpkins and mice into… High yieldHe jokes, referring to children’s tales. “Now midnight has struck, and the cart and the chestnuts are back to the pumpkins and mice,” he says.

He adds that the current scenario has shown the reality of workers in the fishery industry High yield These are: higher-risk or lower-quality funds, based on the composition of the fund’s portfolio. Therefore, Figueiredo outlines a step-by-step guide for those who wish to identify FIIs with such characteristics.

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How to identify the Department of Fisheries Industries High yield?

At first, Figueiredo recommends not taking the fund’s name as a basis. According to him, some portfolios include the term High yield in the sect, but they end up being less dangerous than others who don’t adopt the same care.

Therefore, the Spiti specialist proposes to focus on the FII “paper” management report, especially on the table detailing the CRIs that are in the fund’s portfolio.

He stresses that “it is necessary to monitor the index attached to the papers, mainly the rate at which the index is added”. The higher the rate, the higher the risks inherent in the process,” Figueiredo reinforces.

The investor is advised to use the yields offered by direct treasuries to compare whether the CRI debtor has agreed to pay a price that is too high – and therefore difficult to settle.

Figueiredo also states that CRI cases have different chains – senior, mezzanine and subordinate – that indicate priority of payment in the event of default. The parameter is also a good tool for assessing FII’s portfolio risk.

“The largest will get first in the event that, for example, the debtor makes a partial payment,” he explains. “There is a resource left, there are payments to the mezzanine chain, and only then, to the subordinate” – who has higher rates, but could suffer more in the event of eventual default, the expert notes.

The portion of the project related to CRI must also be considered, Figueiredo says. Sectors that are more sensitive to interest rate fluctuations tend to have higher defaults, which ultimately affects businesses and bond premiums.

Figueiredo concludes that a real estate fund whose portfolio is highly concentrated in CRIs with such characteristics — high rates, sub-chain and less flexible sectors — ends up assuming a higher level of risk.

The full interview with the Spiti specialist — including advice for evaluating collateral included in the CRIs — can be found in the Tuesday (4th) edition of FIIs University. produced by InfomoneyThe program is broadcast every Tuesday at 7 pm on the channel Infomoney on YouTube. You can also review all previous edits.

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