FII: four reasons to invest in 2023 even with fixed income yields of 13.75% per annum

Is it worth investing in real estate funds when fixed income investments pay 13.75% a year? The question became recurring among investors in the last months of 2022 and is repeated in the new year. After all, why invest in FIIs if there are profitable and less risky options on the market?

For Marcos Baroni, head of real estate fund research at Suno and a leading product specialist, the answer to the above dilemma involves understanding the objectives of an FII portfolio.

“Real estate funds were not made to have an explosion of income”, explains Professor Baroni, as is well known. “FIIs aim to offer investors asset protection, monthly income generation and a resilient portfolio.”

According to the specialist’s assessment, the product has delivered what its characteristics promise and, therefore, remains a good investment alternative for 2023, even in the face of increasingly strong competition from fixed income.

To reinforce the thesis, he describes four factors that stimulate investment in real estate funds, especially in a year that promises to be quite challenging for investors.

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Selic tends to decrease over the long run

Initially, Professor Baroni recommends caution in comparing the CDI rate (interbank certificate of deposit) and real estate funds.

“Be careful not to look at a short-term scenario and believe that this will always be the case,” he warns.

Today the basic interest rate of the national economy, the Selic, is 13.75% per annum. The indicator serves as a benchmark for fixed income investments.

In this way, the higher the Selic, the more profitable fixed income becomes, which ends up attracting variable income investors, including those in real estate funds – which lose their attractiveness and, consequently, their value on the stock exchange.

Baroni recalls that the current level of interest rates in the country cannot be perpetuated and, therefore, the return on fixed income tends to decrease over time – for the good of the national economy, he reiterated.

“If we are sure that the Selic rate will be around 9% or 10% in the coming years, get ready, because we will have a country that will retreat”, he reflects. “I want to believe that in the next ten years we will again have a country with a Selic rate closer to 5% than 10%.”


He also says that every percentage point drop in real interest represents a very significant appreciation in risk assets, including real estate funds. With this, he points out, it is possible to measure the appreciation potential of FIIs from now on.

The resilience of real estate funds

Professor Baroni recalls that 2023 opens as a challenging year for all products that involve some type of risk, and not just for real estate funds. On the radar there are above all uncertainties related to the fiscal policy of the Lula government.

“It seems the real estate fund is the ugly duckling of history,” he says. “On the contrary, in a difficult year like 2022, FIIs still closed on the rise”, recalls the specialist, referring to the trend of the Ifix – index of the most traded real estate funds on the B3.

In a year marked by a quarter of deflation, electoral tension and a Selic rate of 13.75% per annum, the indicator closed 2022 with an increase of 2.22%, after two consecutive years of decline – from 10.24 % of 2020 and from 2.28% of 2021.

Baroni believes that the result of Ifix takes into account the dividend distributed by the real estate funds in the period, one of the main objectives of the investor in the product.

Returns, he recalls, compensate for any observed losses with price depreciation, reinforcing the resilience of FIIs and offering another feature (the recurrence of returns) promised by the product.

“When you look at a 10-year spectrum, real estate funds have given a little more return than fixed income,” Baroni covets, always taking Ifix’s performance as a basis.

FIIs can produce much more than Ifix

But if Ifix overcame the challenges and closed the year with an appreciation of just over 2%, those who opted for Certificates of Deposit Banking (CDB) throughout 2022 had a return of up to 128% of the CDI ( fixed-income reference rate) per annum, in the case of post-fixed securities. In light of the performance, the question follows: why invest in FIIs if there are other products that are more profitable and less risky?

In addition to the resilience shown by Ifix in the most adverse moments, Baroni explains that real estate funds can generate a much higher return than the indicator – which only reflects the market average.

“A portfolio with minimally careful selection tends to perform a little bit better than fixed income,” he says. “A portfolio of an investor who has studied a little more and who seeks assets with above-average competitive advantages can earn much more,” she reiterates.

In 2022, for example, the Ourinvest JPP fund ([ativo=OUJP11]) increased 26.08% and topped the list of biggest increases for the year. Riza Akin (RZAK11) and Valora CRI (VGIR11) follow, with yields of 23.69% and 16.23% respectively.


“You can’t simply compare the CDI tariff with the Ifix”, argues Baroni. “The real estate fund index is an average of 111 portfolios which, if well selected, can generate a return higher than that obtained with fixed income investments”.

FII for asset protection

Finally, Baroni points out that real estate funds are products backed by real estate, assets traditionally used to protect assets. In this regard, says the expert, even the FIIs have kept their promises.

“See the latest relevant facts [divulgados pelos FIIs] and see what’s happening with asset sales [imóveis dos fundos] with double-digit internal rates of return,” he suggests.

It refers to a sequence of transactions announced by real estate funds throughout 2022, signaling value creation in fund portfolios. One prime example is CSHG Renda Urbana (HGRU11), which negotiated 18 stores leased to Arthur Lundgren Fabrics, a group known as Casas Pernambucanas.

The latest deal was closed this Tuesday (3) and involved a property in Goioerê, Paraná. The space was sold for BRL 3.975 million, a price 37% higher than the invested amount and 24% higher than the appraisal value of the property in 2022.

Furthermore, Baroni points out that the appraisals released by the FIIs in recent months are raising the fair values ​​of the spaces.

Both the sale and the revaluation of the book price of the properties reflect, in the expert’s opinion, the mismatch between the price of the stock traded on the Stock Exchange – largely discounted – and the fair value of the assets present in the funds’ portfolio. The difference suggests a capital gain opportunity, concludes Baroni.

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How do FIIs work?

Real estate trusts raise funds from investors to buy properties that can later be rented or sold. The revenues obtained from the operations – leasing or capital gains – are distributed among the shareholders, in the proportion in which each has invested.

Over the years the real estate fund market has developed and today there are focused funds ranging from office management to rural properties, including shopping centres, logistics warehouses, hospitals and bank branches.

On the market, investors also have the option of “paper” FIIs, which invest in fixed-income securities linked to the real estate sector. The stocks are indexed to price indices and the CDI and have benefited in recent months from rising inflation and interest rates in the country.


More suggestions and analyzes from Professor Baroni are available in this Tuesday’s (third) edition of FII Leaguepresented by Maria Fernanda Violatti, analyst at XP, Thiago Otuki, economist at Clube FII, and Wellington Carvalho, journalist at Money info.

Produced by Money infothe program airs every Tuesday at 7 pm on the channel Money info on Youtube. You can also review all past changes.

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