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Investment Funds in Brazil

Mariana Magalhães Santos
Lucas Rezende
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Editor's Note: From the boom in ESG investment to the new regulatory landscape paving the way for innovation, Investment Funds are creating momentum in Brazil. In the article below, Mattos Filho's partner Marina Procknor, who is ranked in Band 1 in our Investment Funds rankings and is widely recognised as a prominent figure among a new generation of highly specialised lawyers, writes about the challenges and opportunities for investment in Brazil. The piece is co-signed by Mattos Filho's associates Mariana Magalhães and Lucas Rezende. Mattos Filho is a full-service powerhouse with a leading Investment Funds department.  

Brazil's economy faces significant challenges in 2022 due to several factors, including: the upcoming and extremely polarized Presidential election to be taken next October; the inability of the current federal government to pass the most needed administrative and tax reforms, long awaited by domestic and international markets; the Central Bank’s continuing monetary policy to raise interest rates to tackle inflation; and last, but not least, the long-lasting effects of COVID-19, worldwide.

But the Brazilian investment funds industry reached BRL6.89 trillion last January, proving that it remains resilient, and playing a major role on bringing relief, development, and prosperity among all the obstacles referred to above. Brazilian entrepreneurship remains strong, the digital economy has come to stay; and it is transforming our industry, generating opportunities, and placing the region as an innovation and technology hub. The pandemic and the IPOs boom that the Brazilian market witnessed during 2021 brought more international investors and with them important discussions on Environmental, Social and Governance (ESG) values. Sustainability is a worldwide topic of interest, and the Brazilian asset management industry has paid close attention to the recent global developments on these matters. Although there is still a long journey to go with respect to ESG factors, market participants are in the right direction and much better positioned than before the pandemic started.

Brazilian regulators have also been encouraging the emergence of new agents in the market, including through innovative regulation that focuses on creating legal certainty for new products and financial technologies, incentivizing the decentralization of credit and financing, and liaising more directly with the market and self-regulators to understand the current needs of the asset management ecosystem. Among those innovative regulations, one of the most anticipated ones is the new regulatory framework of the entire investment funds industry in Brazil, which is expected to be enacted by the Securities and Exchange Commission (CVM) within the first semester of 2022.

The New Investment Funds Regulatory Framework  

The new rule represents an important reform in the current funds’ regulatory framework, as it is seeking to address several requests presented by the market over the last decades and to promote a better alignment of the Brazilian jurisdiction to the best international standards: for example, funds shall be allowed to have different classes of shares with portfolio and risk segregation; investors shall be able to finally be granted limited liability when investing in funds in Brazil; funds shall have the ability and right to go through insolvency procedures in certain events; sponsors, portfolio managers and other service providers shall have more contractual flexibility to negotiate and agree on investment mandates, governance, and economic rights with investors, as well as their own civil liability and indemnification rights and obligations.

Agribusiness Investment Funds  

The Brazilian Congress enacted a law in March 2021 that created a new type of agribusiness fund, allowed to invest in a broad range of assets and securities within the agribusiness sector, including equity, debt, listed securities, private projects, and/or rural land. Although other categories of funds were already allowed to invest in several types of assets and securities within the agribusiness sector, this new category referred to as Fiagro may accommodate a more flexible investment mandate under a single fund, as well as offer tax exempted investments to retail investors (the same tax exemption offered to Brazilian REITs investors). The law seeks to facilitate private financing and investments in the agribusiness sector and to narrow down the gap between the domestic capital market and agribusiness entrepreneurs.

Listed Funds  

There is no expectation of a particularly bustling year for Initial Public Offerings of listed funds in Brazil. Nevertheless, in the past years we’ve seen a boost of the participation of individuals investing in the capital markets, which resulted in the launch of several listed funds during this period and the consolidation of an active secondary market.

A highlight for ETF and Depositary Receipts backed on offshore ETF (BDR-ETF), an easy-to-understand product that reached its peak during 2021. In December 2020, for example, there were 30 ETFs tradeable on the Brazilian stock exchange and this number grew up to 170 in December last year, with approximately 600,000 investors. ETF and BDR-ETF have finally found their space in the Brazilian industry.


Private equity and venture capital transactions may benefit from the challenging economic scenario, particularly those involving international fund raising. ESG funds promise to grow in 2022, while Brazil has seen the rise of funds targeted on clean energy and carbon rights. Infrastructure assets have been, and promise to keep being, a trend in Brazil for the next year, especially after the Brazilian National Development Bank (BNDES) launched in January their intention to invest up to BRL2.5 billion in infrastructure equity or debt funds through a competitive process among market players.

Brazilian funds have gone through significant developments in recent years and 2022 expects to consolidate this wave. The long-desired launch of the new regulation promises to revolutionize the way market players structure their funds, creating major incentives for offshore investors to invest in more safe and standardized products in Brazil. In an industry that occupies the second place in relation to number of funds, but that at the same time only occupies the 11th position in relation to global AUM, there is certainly lots of room to grow and opportunities for new products.