Why are Brazilian Real Estate Funds Falling? Specialist Explains

According to the analysis presented by the managing partner of Clube FII, this is not a favorable time to invest in real estate funds, as the Yield spread is below the historical average

Danilo Barbosa, Managing Partner at Clube FII

By: SiiLA News

06/14/2024

The second quarter of 2024 has been quite unpleasant for the FIIS market, especially for Shopping Mall funds. According to an analysis by Clube FII, it is no coincidence that real estate funds are facing challenges. A widening curve in the Tesouro Direto has narrowed the difference between the Yields of IFIX and NTNB-35, reducing it to a difference of 3.54%.

The comparison between the historical Yield of real estate funds and the NTNB 2035 shows a difference of 1%, indicating a lower risk spread. When this difference is compressed, the profitability of the funds can be impacted.

This curve widening pressures the competitiveness of the real estate funds' profitability in relation to the risk-free rate reference. The difference between these curve rates affects the profitability of the funds, especially paper funds, which pay more due to monetary corrections in contracts.

According to the analysis presented by Danilo Barbosa, managing partner at Clube FII, this is a less advantageous time to invest in real estate funds, as the Yield spread is below the historical average, reaching 2.54%.

Read more: High vacancy and low rental value lead real estate in FIIs to perform below market average

What to Invest In?

However, it is highlighted that when analyzing the market price in relation to the book value – technically known as PVP – FIISs are moving side by side with paper funds.

Despite the funds not being in their glory days, the situation is better than on the stock exchange. This month, the IBOVESPA experienced a 6.8% drop. Meanwhile, contrary to experts' expectations, the FIIs did not follow the anticipated decline.

"What can we learn from this? You should diversify your portfolio. Again, we fall into this topic of diversification. This is so you are not always chasing the best rates and opportunities, moving your assets abruptly. We know that fixed income is in a great moment, yes, take advantage and make your contributions, but do not constantly change your strategy, because when this curve closes, opportunities will be missed," comments Barbosa during the analysis.

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