Brazil has historically lived with lower-than-necessary investments in infrastructure. The sector contributes around R$200 billion per year to the construction and modernization of roads, railways, airports, energy and basic sanitation, but this is only half of what would be needed. The reason is that there is a lack of more pockets to support the financing of the works.
In a scenario where the government does not have space in the Budget to invest and pension funds are outside this market, it is up to professional investors to support infrastructure. Large managers entered the game, such as Patria Investimentos, China, Perfin and XP recently gaining large concessions, but all of this financed by funds aimed at qualified investors (with more than R$1 million) and professionals (over R$10 million).
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Even with these big players in the game, the resources raised have not been enough. The main difficulty for traditional infrastructure funds is finding a format that can attract individuals to a long-term segment, where the return on investment can take more than a decade.
But there is a market effort to find ways to attract even a small portion of the money invested by individuals: according to data from Anbima, more than 20 million CPFs have almost R$3 trillion allocated to fixed income products and on the stock exchange.
Debt issuances in the infrastructure sector in the first half reached a record R$206.7 billion, opening the opportunity for structuring infrastructure investment funds (FI-Infra). Currently, there are 25 funds of this type listed on B3.
Patria enters the game
O Patria Investimentos is the most recent manager to pioneer this market. The house intends to use its experience of managing more than R$31 billion in infrastructure assets to attract individual investors. The house, which has a total of R$244 billion under management, opened its first FI-Infra aimed at the retail public.
To deal with the new public, Patria’s FI-Infra will have an indefinite term and will be listed on the Stock Exchange, as is already the case with real estate funds. This, remembers Marcelo Souza, partner and CIO of Patria’s infrastructure credit strategy, will provide liquidity and allow investors to enter and exit the fund as they wish.
The vehicle, which will be a first test for both sides of the counter, will raise R$100 million and offer monthly dividends to attract retail investors, who are still little accustomed to the infrastructure dynamics. “We have to deliver on the demands of this public, who want dividends, predictability and a good return”, says Marcelo Souza.
The model follows the structure of what other houses are betting on. Recently, the JiveMauá raised R$437.5 million from an infrastructure investment fund (FI-Infra) with more than 11 thousand shareholders. THE BRZ investments is also in the process of raising an FI-infra of R$100 million.
The fund’s portfolio will be made up of incentivized debentures (law 12,431) from third parties, primary debt issues from the assets managed by Patria and financial structuring (“project finance”) of large infrastructure projects. Souza states that the vehicle already has 15 to 20 operations chosen to invest in the first month after the end of funding. The goal is to obtain a return of 0.5% to 1.5% on NTN-B, public bond indexed to inflationwith the distribution of dividends of around 1% per month exempt from income tax.
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An initial difficulty, especially in the most recent issues of incentivized debentures, in finding good opportunities at a time of low profitability. This is because the spreads – difference between the interest rate that the issuing company pays to its investors and the return on NTN-Bs – became lower, due to the demand for these debentures.
Patria’s infrastructure credit CIO recognizes the problem, but believes that, in the long term, the spread will become more profitable again. “This trend is already starting to reverse, we are starting to see this now that the large infra funds have stopped raising money”, says Marcelo Souza. “In other words, this demand is no longer growing and the tendency is for spreads in the coming years to return to higher levels.”
