On the left, João Morbim (B3). In the middle, Flavio Vegas (Global X). On the right, Isabella Nunes (JP Morgan)
During the panel moderated by João Morbim of B3, Flavio Vegas said Brazilian portfolios remain largely concentrated in local fixed income, real estate funds and domestic equities. When investors allocate internationally, they tend to prioritize broad indexes such as the S&P 500 and Nasdaq.
According to Vegas, a global ETF should serve a clear purpose, whether to diversify the portfolio, provide access to a theme with no equivalent listed companies in Brazil or add exposure to the US dollar. Isabella Nunes added that the product should be supported by tools that help financial advisers, consultants and pension funds explain its role to the end investor.
Revenue and profits help validate a structural trend
Flavio Vegas distinguished structural trends from tactical opportunities by considering their time horizon and the fundamentals of the companies involved. Electrification, population aging, the energy transition, data infrastructure and artificial intelligence were cited as developments that could extend over the next 10, 15 or 20 years.
According to Vegas, the existence of revenue, profits and investments directly associated with a theme helps separate an economic transformation from a temporary market movement. Artificial intelligence, data centers and semiconductors were presented as examples of sectors where investment is already translating into operating growth.
Rare earths and defense were also classified as structural themes. Vegas linked rare earths to electrification, electric vehicles, artificial intelligence and semiconductors. In defense, he highlighted long-term government contracts and the continued expansion of public investment in technology.
Each type of ETF requires a different analysis
Isabella Nunes said J.P. Morgan had brought 25 global ETFs to Brazil, including eight traditional-beta funds, eight smart-beta products and nine actively managed global ETFs. According to the executive, the assessment should vary according to the structure of each strategy.
For traditional-beta ETFs, the main criteria are cost, liquidity and tracking error, which measures how closely the fund follows its benchmark. With smart beta, the analysis should focus on the systematic selection methodology, including factors such as value, momentum and quality.
For active ETFs, Nunes recommended evaluating the management team, investment process, performance history, alpha generation and active share, which indicates how different the portfolio is from its benchmark. She summarized the comparison as follows: for traditional beta, investors assess price; for smart beta, methodology; and for active management, people, processes and performance.
Active ETFs capture a growing share of flows
Isabella Nunes said active ETFs represent approximately 10% of total assets in the global ETF industry but receive around 40% of net inflows. Their growth accelerated after regulatory changes introduced in 2019.
According to Nunes, Brazilian investors are already familiar with active management through traditional investment funds. Active ETFs offer another structure for the same management approach, with greater transparency and cost efficiency.
The executive also identified a potential role in reducing concentration risk. In broad equity indexes, a small number of companies may represent a significant share of the portfolio. In fixed income, indexes weighted according to the amount of debt outstanding may allocate more to the largest borrowers without necessarily prioritizing credit quality.
Thematic allocations occupy the satellite portion of a portfolio
Flavio Vegas placed thematic ETFs within a core-and-satellite framework. For portfolios with a higher risk tolerance, he mentioned an allocation of 10% to 15% to satellite positions.
This portion of the portfolio may be directed toward themes with limited overlap with broad market indexes. According to Vegas, rare-earth and defense strategies hold companies that have little representation among the largest constituents of the S&P 500 and Nasdaq, potentially providing more effective diversification.
The allocation size should nevertheless reflect the theme’s investment horizon and role within the portfolio. Structural trends may support longer-term exposure, while strategies linked to specific commodity cycles may require a more tactical approach.
UCITS and education may define the industry’s next stage
Isabella Nunes identified the potential introduction of European UCITS ETFs in Brazil as one of the expected developments for the industry. According to the executive, these products could offer tax and operational benefits to local investors.
The shift toward fee-based financial advice was also associated with ETF growth. Nunes said more than 60% of volume in the US market already operates under this model, which reduces dependence on product commissions and favors transparent, lower-cost vehicles.
Flavio Vegas and Isabella Nunes agreed that education will be decisive. With more than 100 locally listed ETFs and over 300 ETF BDRs available on B3, the challenge is no longer limited to expanding the product range. It also involves explaining how each product can be used in portfolio construction.
