Itau Asset Management, the biggest private-credit fund manager in Brazil, is betting on securitized products as a way to help investors diversify and deal with the nation’s economic environment, including rising interest rates.
With 460 billion reais (US$81.2 billion) in liquid private credit under management, Itau Asset is launching a fund that buys credit packages, which are known in Brazil as FIDCs. The firm’s new product is the first with tax advantages aimed at “qualified investors,” individuals with more than 1 million reais invested.
“When the structure is well-built, FIDCs offer good protection to investors with an attractive relation between risk and returns,” Fayga Delbem, the firm’s head of private credit, said in an interview. “We think this product is here to stay, so we’re launching this FIDC with a diversified portfolio this month and planning to have others soon.”
FIDCs are funds that exist only in Brazil and invest in credit with shares sold to investors in tranches that can be separated by risk, similar to the US securitization market. They were rising stars last year, as investors sought the security of fixed-income investments with collateral.
The funds got a boost from a regulatory change in 2023 that allowed them to be sold to retail investors, and had net inflows of 120.9 billion reais in 2024, according to Anbima, Brazil’s capital-markets association. In the month through March 7, those funds raised 2.8 billion, after a combined 11.4 billion reais of outflows in January and February.
Investors see good prospects for the product amid uncertainty caused by global tariffs and volatile markets.
“Last year was the year of private credit in Brazil, and after an excess of optimism we had a technical correction in December,” she said. “And now we have a situation with some opportunities, considering many companies with different credit profiles that pay attractive spreads.”
The fund Itau is launching is the first for qualified investors that will have a 15% tax paid only when the money is withdrawn. Usually, FIDCs and other credit funds anticipate tax payments twice a year, in May and November. Long-term funds pay income taxes of 15% and short-term ones owe 20%.
Credit sold without collateral by highly leveraged companies has been a reason for concern because the nation’s high rates make it difficult for them to pay their debt on time, according to Ricardo Espindola, a credit portfolio manager at Porto Asset, the asset-management arm of insurer Porto Seguro SA. That’s why spreads are narrowing for higher-quality companies as investors seek less risk, said Espindola, whose firm has 35 billion reais in assets under management.
FIDCs, on the other hand, are structured to navigate turbulent times, he said. They offer less volatility and higher returns, but also have less liquidity, Espindola said, adding that he is investing more money from Porto Asset’s funds in FIDC senior tranches, taking into account the liquidity requirements of each fund.
“Securitization is a way to increase the resilience of your credit portfolio, since the interest rates charged to individuals and smaller companies are already so high that they are less affected by an increase in the benchmark interest rate,” said Alexandre Coutinho, a senior portfolio manager and head of Brazil credit at Patria Investments Ltd., one of the biggest alternative-asset managers in Latin America.
Patria is launching a pension fund that will invest in FIDCs and bonds from smaller companies with very low leverage. It’s also planning to offer a new FIDC soon. The firm has about 3 billion reais in local structured private-credit funds.
With 25 employees, double the number in 2021, Itau Asset’s credit team has its own credit scores for companies, and doesn’t depend on outside rating companies. It also has three traders on its local-bond credit desk. The asset manager had 130 billion reais in net inflows for private credit funds last year, which were invested in high-grade to high-yield debt, and also tax-exempt infrastructure bonds.
According to Delbem, the secondary market for private credit in Brazil used to trade about 5 billion reais a month about five years ago, and now the figure has surged to 40 billion reais.
Last year, Itau Asset bought 160 billion reais in private credit — about 130 billion reais of those were bought directly from companies. In 80% of those primary-market transactions, Itau Asset was the only investor in a private placement or acted as an anchor investor.
“The private-credit market developed a lot in Brazil in recent years,” Delbem said. “Now it’s a structural part of any investor’s portfolio.”
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Giovanna Bellotti Azevedo and Cristiane Lucchesi, Bloomberg News
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