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SELI11, BB Asset’s fixed income ETF, reached R$1.82 billion in net assets on September 24, less than a month after it began trading. Its shares provide access through B3 to a portfolio of Brazilian government bonds linked to the Selic rate.
The fund seeks to track the B3 Tesouro Selic Index, known as ISELIC B3. SELI11 holds Treasury Financial Bills, or LFTs, with different maturity dates. Investors buy a share of this portfolio, rather than a specific bond through the Tesouro Direto program.
What does SELI11 hold?
LFTs are floating rate government bonds whose returns track the Selic rate. In the recently published portfolio, SELI11’s largest holding was the LFT maturing in June 2032, at 21.17% of assets. It was followed by bonds maturing in September 2027 (13.21%), March 2029 (10.24%), September 2028 (9.29%) and March 2028 (8.99%). Together, these five positions represented 62.90% of the portfolio.
The range of maturities reflects the ISELIC B3 methodology. To enter the index, an LFT must meet requirements related to its remaining term and trading activity in the secondary market. Each bond’s weight takes into account both the amount outstanding and its trading volume. The index portfolio is adjusted quarterly, so the ETF’s composition can change over time.
Under the fund’s investment policy, at least 95% of its assets must be invested in index constituents or positions intended to track the index’s return.
Who provides buy and sell quotes during trading?
BTG Pactual is SELI11’s market maker. Its role is to maintain buy and sell quotes for the ETF’s shares during the trading session, within the rules governing its activity. This helps investors find a counterparty and can narrow the gap between quoted buying and selling prices, known as the spread.
SELI11 has a total annual fee of 0.19%. Trading may also involve charges from B3 or the investor’s broker. The fund is open to investors generally, including individuals and companies.
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A 2032 maturity does not mean a 15% income tax rate
SELI11’s tax treatment deserves attention because an LFT’s maturity date does not, by itself, determine the ETF’s tax rate. For fixed income ETFs, the applicable rate depends on the portfolio’s average interest rate reset period, rather than how long an investor holds the shares.
Brazil’s National Treasury considers an LFT’s rate to reset daily because its return tracks the daily Selic rate. Under the rules for fixed income ETFs, a portfolio with an average reset period of up to 180 days is subject to 25% income tax on gains.
Buying a bond through Tesouro Direto follows a different tax rule: the rate on returns declines as the holding period increases, reaching 15% after more than two years. This is one distinction between buying Tesouro Selic bonds directly and investing in SELI11 shares. Another is how they are traded: ETF shares are sold at the price available on the exchange, which depends on buy and sell quotes at that moment.
SELI11 brings floating rate government bonds with different maturities into a single ETF share. Its portfolio determines its exposure to the Selic rate, while fees, taxes and the trading price on B3 shape the return an investor receives.
This content is for informational and educational purposes and does not constitute an investment recommendation.
