Luis Masagão, B3
Brazil’s ETF market is approaching the milestone of 1 million investors. According to figures presented by Luis Masagão of B3, the investor base reached 929,000, representing an increase of 39%. Assets held in custody more than doubled and approached BRL 70 billion, while total industry assets reached BRL 142 billion.
The number of available products also increased. The number of locally listed ETFs grew 55% in one year to 219. B3’s platform also includes 312 Brazilian depositary receipts backed by global ETFs, providing local access to funds managed abroad. Despite this expansion, ETFs still represent less than 5% of total assets in Brazil’s investment fund industry.
Diversification was identified as one of the most relevant recent changes. In addition to products linked to the Ibovespa, the market now offers strategies covering fixed income, gold, crypto assets, international equities and specific investment themes. Fixed-income ETFs approached equity ETFs in trading volume, expanding the use of the structure in an asset class that is particularly important to Brazilian investors.
BNDESPAR shifts from divestment to allocation
During the panel, Marcelo Marcolino of BNDES described a change in BNDESPAR’s strategy. At the end of the year preceding the event, the institution launched a public selection process to allocate BRL 1 billion to ETFs, shifting from its historical focus on divestment to a position as an investor in the industry. Five asset managers were selected, with potential allocations of up to BRL 200 million per ETF.
Marcelo Marcolino, BNDES
The initiative builds on the bank’s role in creating Brazil’s ETF market. In 2004, BNDESPAR launched PIBB11, which tracks the IBrX 50, to broaden access to capital markets, provide lower-cost diversification and gradually divest part of its equity portfolio.
The first offering raised BRL 600 million and reached more than 50,000 individual investors. To reduce the risks of adopting a product that was still unfamiliar to the market, BNDES offered investors a put option covering up to BRL 25,000. A second offering one year later raised BRL 2.3 billion and attracted more than 120,000 individual investors.
In 2012, the bank again used an ETF to support market development. The BRL 1 billion offering of ECOO11, linked to the Carbon Efficient Index, was presented as the world’s largest offering associated with a sustainability index at the time.
Fixed income broadens the reach of ETFs
Expansion into new asset classes shows that the industry’s growth no longer depends solely on traditional equity indexes. In fixed income, ETFs have also become vehicles for distributing bonds, combining exchange trading, portfolio diversification and index-based exposure.
According to Masagão, operational simplicity and cost efficiency help explain the product’s adoption by individual investors, institutions and financial advisers. ETF shares can be traded through the same infrastructure used for equities, while locally listed international products can reduce the need for direct access to foreign markets.
Marcolino organized capital-market development around three pillars: investors, instruments and infrastructure. Under this framework, ETFs broaden the range of available instruments, B3 supplies the trading infrastructure and BNDESPAR’s new allocation is intended to increase market depth.
Despite the industry’s recent expansion, its share of less than 5% of total Brazilian fund assets shows that ETFs still occupy a limited portion of the market. The growth of fixed-income products, the expansion of available strategies and BNDESPAR’s institutional allocation indicate that the next stage will depend on both product development and continued growth in the investor base.
