With the rise of the IPCA and CDI rates, knowing how to choose a real estate fund to invest in is the first step to ensuring higher financial returns. Currently, real estate receivables funds are providing very positive returns for investors.
However, despite high dividends, caution is recommended when investing in this asset class. Analyzing the fund’s portfolio and evaluating its managers can help investors make informed decisions.

In this post, we’ll discuss how to analyze real estate receivables funds specifically, along with their advantages, and risks, and how to choose the best fund for your portfolio.

What Are Real Estate Funds?

The primary characteristic of a real estate fund is that it functions as a sort of condominium for investors. In other words, a percentage of resources is pooled together to be invested in the real estate market all at once.

How Do I Invest in Real Estate Funds?

With the growth of the financial market, more individual investors are entering the stock exchange to invest in real estate funds. Since this market is growing and evolving with trends, having financial advisors to manage your assets and determine where and how much to invest for optimal returns is invaluable.

The Best Real Estate Fund to Invest In

A receivables fund is a type of real estate fund primarily aimed at investing in securities backed by real estate assets. These investments can include Real Estate Credit Letters (LCI), Real Estate Receivables Certificates (CRI), Mortgage-Backed Securities (LH), REITs, Additional Construction Potential Certificates (CEPAC), and Credit Rights Investment Fund Shares (FIDIC).

What Are Receivables Funds?

Put simply, a receivables real estate fund invests in debt and earns interest, which is then distributed to investors after deducting costs.

Advantages of Investing in Receivables Funds

One key advantage of receivables funds is that, despite having most of their portfolio in receivables, they can also include stakes in other funds, depending on the desired risk level.
The main benefits of investing in this type of fund are access to securities that are not always available to individual investors, lower volatility compared to other types of funds, and professional management overseeing and analyzing investments.
As with all real estate funds, receivables funds offer a practical way to build a diversified portfolio managed by professional fund managers.

Disadvantages of Investing in Receivables Funds

The main downside of this type of fund is that it generally cannot grow its net asset value because it distributes inflation adjustments, unlike equity funds (brick funds) where property values can appreciate, increasing the fund’s value.

Indicators for Choosing the Best Real Estate Fund

Although the final investments are in fixed-income assets, investing in receivables real estate funds is considered a variable-income investment and carries risks such as:

1. Volatility: Changes in the share price.

2. Profitability: Variations in income distribution.

3. Liquidity: Trading volume on the stock exchange.

It’s worth noting that CRIs and investments in real estate funds are not guaranteed by the Credit Guarantee Fund (FGC). When evaluating a receivables fund, consider the following:

1. Risks in the fund’s portfolio.

2. Dividend Yield.

3. Fund management quality.

Risks of Investing in Real Estate Funds

The risks of receivables funds can be assessed by analyzing the debtors. It’s essential to understand whether the company has high credit risk or is performing well. For example, if the company is close to filing for bankruptcy, it would be a poor choice to invest in its receivables fund.
Other points to consider when evaluating risks include:

Loan-to-Value (LTV): The lower the percentage, the lower the risk.

Rating: Classified as A, B, and C, where A is the least risky and C is the riskiest.

Guarantees: Such as fiduciary assignments of shares.

Receivables funds can be classified into two categories: high yield or high grade. High-yield funds aim to distribute higher dividends but take on more risk, while high-grade funds focus on lower-risk investments with correspondingly lower returns.

Dividend Distribution (Dividend Yield)

The Dividend Yield (DY) depends on the fund’s investment portfolio and the indexing of its investments, which are usually tied to IPCA+. As a result, income is generally directly related to inflation.
Unlike equity funds, where contracts are also often indexed to inflation, these adjustments may be harder to pass on to tenants and usually occur only once a year.
The Dividend Yield is calculated by dividing the distributed dividend by the share price. A higher DY is better, but a high DY often comes with higher risk. Thus, analyzing the assets and the fund manager is critical to ensuring the investment is sound.
Beginner investors may fall into the “yield trap,” where a fund shows a high DY due to a drop in share price caused by a risk factor within the fund.

Which Is the Best Brokerage for Investing in Real Estate Funds?

Evaluating a fund’s management can be subjective, but it’s possible to assess it simply by looking at the results delivered, whether it meets its stated goals, and whether its objectives align with yours.
Always review the management’s track record, its decision-making over time, and the clarity and transparency of the information provided in its reports and monthly updates.
Rely on financial specialists to guide you in choosing the right real estate fund to invest in. Count on CIX Capital. Contact us today!