The growth of ETFs in Brazil will depend on products capable of solving concrete allocation challenges, rather than simply expanding the number of listed funds. This was the central theme of Pedro Mota’s participation, portfolio manager at Nu Asset, during the panel “ETFs: Innovation, Access, and the Future of Investments,” held this Tuesday, September 29, at TAG Summit. The conversation was moderated by Kaique Negrão from TAG Investimentos and Thiago Salomão from Market Makers.
Mota identified fixed income, factor-based strategies, and future regulations for active ETFs as key development fronts. In his assessment, exchange-listed structures allow assembling an asset portfolio under known rules, disclosing holdings, and offering trading throughout market hours. Currently in Brazil, the underlying index defines the strategy of available products. “The index is the investment strategy,” he stated.
Liquidity Requires Looking at Underlying Portfolio Assets
One of the questions addressed in the panel was the liquidity of ETFs with seemingly low trading volume. Mota noted that trades reported on the screen represent only a fraction of the market. Market makers maintain bid and ask quotes, while the ability to trade underlying portfolio assets directly influences the creation and redemption of shares.
This does not mean daily volume can be ignored. Evaluating a trade requires considering order size, available quotes, the bid-ask spread, and the liquidity of underlying assets. The manager’s point is that concluding an ETF lacks liquidity simply because it traded little on a given session overlooks part of how the product functions.
When structuring new funds, this analysis starts before listing. Nu Asset examines the target market the ETF aims to access and designs the corresponding index rules. Mota cited equity portfolios tracking the Ibovespa, inflation-linked government bonds, and foreign funds used by local ETFs as examples. Following launch, management’s role is to keep the portfolio aligned with the methodology presented to investors.
Fixed Income and Duration Control
For Mota, the expansion of fixed income is particularly relevant in a market where government bonds occupy a central role in portfolios. He stated that ETFs in this asset class gained momentum after a slower start and now hold more assets under management than equity ETFs in Brazil.
The manager dedicated part of the discussion to duration—a key metric measuring bond sensitivity to interest rate changes. A portfolio with a longer duration tends to fluctuate more when interest rates shift. According to Mota, traditional inflation-linked indices can see their duration change over time, altering the investor’s risk exposure without an active allocation decision.
Nu Asset collaborated with B3 to develop indices for IPCA+ bond ETFs targeting durations of two, five, and ten years. Rebalancing aims to preserve this target duration over time. Mota distinguished this structure from purchasing an individual NTN-B bond: an individual bond has a fixed maturity date, whereas the ETF continually refreshes the portfolio according to index rules.
He also cited NCDI11, linked to Treasury Selic bonds, to illustrate how traditional fixed income exposure can be delivered via exchange-traded shares. In this case, the experience includes visible intraday pricing and T+1 settlement. Differences between ETFs, individual bonds, and traditional funds involve costs, taxation, and the timing of liquidity needs.
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From Dividends to Active ETFs
The panel coincided with the third anniversary of NDIV11, the first Brazilian ETF to distribute dividends. Mota shared that the index tracked by the fund was co-developed by Nu Asset and B3. The methodology selects Ibovespa stocks based on payout history, weighting recent dividend distributions more heavily than older ones.
According to the manager, strategies like dividends, low volatility, and high beta demonstrate that index-linked ETFs can follow rules far more tailored than broad market-cap portfolios. For low volatility, selection is updated based on stock performance. A company or sector that ceases to display the characteristics required by the methodology may lose allocation in the subsequent rebalance.
Mota argued, however, that the next regulatory milestone should permit ETFs without the requirement to track an index. He described this distinction as the difference between index-based and non-indexed management. In his view, active ETFs should maintain an understandable investment policy and transparency standards compatible with exchange trading. This possibility is currently under discussion in the Brazilian market but depends on updates to current regulations.
The Scale of Opportunity and Upcoming Products
Discussing the relationship between ETFs and traditional funds, Mota stated he expects listed products to capture a larger share of core portfolio allocations—such as broad equity exposure, nominal fixed rate bonds, and IPCA+ treasuries. For strategies requiring discretionary manager decisions, he foresees a complementary role. Thus, the expansion of ETFs does not imply the decline of traditional active management.
The manager cited the R$ 1 trillion milestone in total assets under management as a long-term ambition for the ETF industry, without setting a specific target date. For Nu Asset, he affirmed the goal of multiplying its ETF AUM by more than tenfold, which he estimated at approximately R$ 1.3 billion during the panel.
Regarding product offerings, Mota highlighted Nu Asset’s previously launched currency-hedged international ETFs targeting US corporate credit and leveraged loans. He also previewed plans to launch a currency-hedged global equity ETF in the coming weeks. Currency hedging aims to mitigate US dollar fluctuations against the Real, though it alters return dynamics and carries costs and effects tied to the futures market. The international portfolio remains subject to price movements of its underlying holdings.
