Galápagos Capital has expanded its lineup on B3 with the 03BK11 and 10BK11 ETFs, focused on inflation-linked government bonds (NTN-B) with constant 3-year and 10-year tenors. Constant duration technology optimizes portfolio allocation, reducing operational costs and offering tax efficiency without semi-annual tax drag (come-cotas).
B3 welcomed the launch of two new inflation-linked fixed-income exchange-traded funds (ETFs) developed by Galápagos Capital: 03BK11 and 10BK11. Composed of IPCA-linked Treasury bonds (NTN-B), the products provide exposure to the three-year and ten-year tenors of the real yield curve, respectively. 03BK11 debuts as the first constant-duration inflation ETF with a three-year term in the Brazilian market, while 10BK11 focuses on the ten-year segment. Both replicate Teva Índices benchmarks and feature a management fee of 0.19% per year.
The development of these vehicles reflects a shift in portfolio construction dynamics in the country—moving from picking individual bonds to actively managing interest rate risk exposure. Analyzing this maturation of the local market, Bruno Stein, Partner and Head of ETFs at Galápagos Capital, highlighted the increased sophistication among allocators:
“The Brazilian market has matured and is more sophisticated, seeking precision in allocation. Previously, most investors bought a bond and held it until maturity. Today, portfolio managers, advisors, consultants, and institutional investors are increasingly focused on overall portfolio exposure, not just the individual asset. The logic is shifting from choosing products to choosing exposures.”
From an operational and efficiency perspective, the new ETFs adopt constant duration technology, a concept well-established in the US market that maintains the fund’s weighted average maturity fixed over time. This structure eliminates the need for successive trades and rollovers of individual bonds as papers approach maturity.
Evaluating the solution’s benefits for allocators, Bruno Stein emphasized the tool’s flexibility: “By combining the 3-year and 10-year terms, investors can adjust their duration level and customize their real interest rate curve exposure with operational ease.” Stein also noted that in an environment of attractive real interest rates, these products offer agility for tactical rebalancing while reducing costs and operational complexity.
From a tax and structural standpoint, the funds benefit from a flat 15% Income Tax rate, total exemption from Financial Operations Tax (IOF), and no semi-annual tax drag (come-cotas), preserving invested capital for continuous compounding. Galápagos Capital, which already surpasses R$ 630 million in assets under management across its ETF platform, reinforced that these launches addressed direct demands from family offices and institutional managers for precise instruments to navigate Brazil’s yield curve.
