The 3 best Fiagros to protect your portfolio and still make money from high interest rates in 2023

The possibility of reaping capital gains by keeping interest rates at high levels reinforces the market’s bet on Fiagros (investment funds for agro-industrial chains) in 2023. Three funds stand out on the radar of specialists in a segment that has shown good signs of expansion in the last year

Compared to 2021, the shareholders’ equity of Fiagros recorded a 544% increase in 2021, reaching the threshold of R$ 10.4 billion. The number of funds has also risen, from 13 to 43.

“Our expectation is that market growth will continue to accelerate in 2023, still driven by so-called ‘paper’ funds”, assesses Bruno Santana, CEO and founder of Kijani Investimentos, referring to funds investing in linked fixed-income securities to agribusiness. “This phenomenon is explained by current interest rate levels, which favor fixed-income products over land or equity investments.”

Currently, almost all of the Fiagros are of the “paper” type and most invest in private credit through agri-food credit certificates (CRA).

The CRAs represent a sort of package of future revenues – such as the installments of a credit assignment or a loan – sold to investors, including Fiagros. In addition to a fixed rate, the security offers a monetary adjustment which, in the case of the agro segment, is usually the CDI (interbank certificate of deposit) rate.

In this dynamic, in addition to protecting the portfolio from the increase in interest rates, the higher the indicator, the greater the income of the funds, which automatically manage to distribute more dividends to shareholders.

While the Cdi accompanies the change in the base interest rate, the Selic, which has gone from 2% at the beginning of 2021 to the current 13.75% per annum, the bet on financial products that have a lot of exposure to the indicator is growing.

Faced with this scenario, three Fiagros stand out among the preferences of the specialists consulted by the Money info. These are Riza Fiagro (RZAG11), Kinea Crédito Agro (KNCA11) and Valora CRA (VGIA11).

CRA value (VGIA11)

Valora CRA (VGIA11) ended 2022 with all of its equity – R$698 million – allocated to a portfolio consisting of 25 CRAs. According to the latest management report released by the portfolio, 100% of the securities are indexed to the CDI rate.

In light of the portfolio, XP analyst Maria Fernanda Violatti estimates that the fund will offer good profitability in the short term, given the projection of keeping the Selic rate – and consequently the CDI – at high levels.

“For 2023, we expect average monthly earnings between BRL 0.12 and BRL 0.16 per share,” he predicts. “[Neste patamar de rendimentos, observamos] a dividend yield (rate of return with dividends) of around 17% per year”, calculates the analyst.

In sectoral terms, the VGIA11 portfolio is mainly divided into agricultural input distributors (46.9%) and cooperatives (45.3%), the portfolio report points out.

Kinea Credit Agro (KNCA11)

With more than 16,000 shareholders, Kinea Crédito Agro (KNCA11) currently holds one of the largest assets in the Fiagros market, with nearly R$1 billion, according to the portfolio management report released earlier this month.

The fund started 2023 with a portfolio that was 92.1% CRA, 6.1% LCI (Real Estate Letters of Credit) and 1.7% cash.

As with the VGIA11, Kinea Crédito Agro’s CRA portfolio is fully indexed to the CDI, signaling a bet that interest rates will remain at high levels for most of the year.

In terms of segments, the majority of KNCA11 stocks – more precisely 45.2% – are related to the sugar and ethanol sector. Already 20% of papers originate in the production of production factors and 10% in the field of fruit growing.

“We believe the fund’s risk/reward ratio is favourable, given factors such as CDI exposure, management quality and portfolio size,” analyzes Caio Araújo, analyst at Empiricus, who has the only buy recommendation for Fiagro at KNCA11.

The last 12, the fund has deposited R$ 1.40 per share, an amount that represents a dividend yield 1.30% monthly. In 12 months the percentage is 14.37%.

Riza Fiagro (RZAG11)

Third Fiagro which is in the crosshairs of the specialists consulted by Money infoRiza Fiagro (RZAG11) currently has an approximate net worth of R$649 million.

In the portfolio – which currently represents 73% of the fund’s assets – there are 20 CRAs, also pegged at 100% to the CDI rate. The position should benefit from the current macroeconomic backdrop and expectations for agribusiness in 2023, said Santana, of Kijani.

“Although the global macroeconomic scenario is challenging, the projections for Brazilian agribusiness are quite positive, with record harvests and exports,” he points out. “Therefore, the maintenance of interest rates and the good prospects for the sector for the year should continue to attract investors to Fiagros”.

According to the latest RZAG management report11, 84% of invested stocks are in the cereals segment. In this crop, the soybean crop accounts for the majority of the portfolio, or 52%.

Last week, the fund deposited BRL 0.12 per share, equal to one dividend yield monthly rate of 1.24%. In 12 months the percentage is 15.42%.

What are Fiagros and how do they work?

Fiagros were regulated by the Brazilian Securities Commission (CVM) in July 2021 and the market has been attracting investors ever since.

In 2022, the number of shareholders in this business category rose from 30,000 to 170,000, according to data from B3’s monthly bulletin.

With a dynamic similar to that of real estate funds, Fiagros invest in rural properties or in fixed-income securities such as CRAs, agricultural and food credit certificates.

As with FIIs, Fiagros pays tax-free dividends. Many make monthly distributions, which is one of the main features of the product.

“Although in a less expressive way [se comparada aos FIIs], we believe in the growth of the category which, in addition to the aforementioned advantages, offers diversification for the investor’s portfolio,” says Mucio Mattos, partner and head of credit at Vectis Gestão. “[O produto oferece] high liquidity and low entry cost, given that the vast majority of Fiagros have shares between R$10 and R$100”.

Santana, of Kijani, suggests investors choose a Fiagro that has a portfolio with good credit quality and portfolio diversification.

“And, for the diversification effect to work within agribusiness, the portfolio needs to cover three major components: segment, location, and borrower—the person responsible for the CRA debt,” he guides.

How much Fiagros makes and how much it pays in dividends

Despite the various challenges faced by the variable income market in 2022 – high interest rates, inflation, elections and fiscal uncertainties – Fiagros closed last year with a dividend yield (dividend yield) average of 1.27% per month.

The 2022 champion was CPTR11, from Capitânia, which posted monthly earnings of 1.64%. In second place is VGIA11, with an average monthly return of 1.53%, followed by EGAF11, with 1.52%. The calculation considered the quotation of the funds as at 19 December.

Read more:

• The more profitable Fiagro has been listed for less than six months and paid dividends of 1.64% per month in 2022; see list

Related