author
Carlos Balthazar Summ
An unprecedented study conducted by CIX Capital and published in the September 19 edition of Valor Econômico examines the impacts of Provisional Measure (MP) 1.184/2023 on real estate funds (FIIs). Among the key changes introduced, the MP raises the minimum number of investors required for a fund to qualify for tax exemption on distributed dividends from 50 to 500. Additionally, fund shares must now be actively traded on an organized secondary market, such as a stock exchange or over-the-counter platform.
Key Findings of the CIX Capital Study
According to CIX Capital’s analysis, if the new tax exemption rules had been in place since the inception of FIIs, 40% of the current top 50 funds by market value would have faced significant risks due to having fewer than 500 investors during their initial public offering (IPO). Among these, 20 funds fell short of the 500-investor threshold in their initial offerings.
● Average Initial Investor Base: The average number of investors in opening issuances was just 93, far below the new threshold.
● Growth Requirement: To qualify for the tax exemption, these funds would have needed to expand their investor base by more than fivefold.
Impact on Secondary Market Liquidity
The study also highlights liquidity challenges:
● Among the 50 most actively traded FIIs in the secondary market today, 34% began with fewer than 500 investors.
● Despite these humble beginnings, these funds now average 139,000 investors each and boast a combined net asset value of R$ 2.1 billion, demonstrating significant growth and broad investor participation over time.
Potential Market Consequences
Carlos Balthazar, CEO of CIX Capital, warns that the provisional measure could become a barrier to entry for new players and funds, stifling market expansion.”If this measure had been in place from the start, it is unlikely the market would have reached its current scale of over 2 million retail investors,” Balthazar explained.
The MP’s requirements may discourage the launch of new funds, undermining a sector that has flourished by offering tax-exempt dividend distributions—a key advantage for attracting investors.
Conclusion
CIX Capital’s study underscores the potential risks posed by MP 1.184/2023 to the growth and inclusivity of the FII market. While the new rules aim to promote transparency and market organization, they could inadvertently hinder the entry of innovative funds and players, limiting opportunities for diversification and long-term growth.
For the full article, visit Valor Econômico
CIX Capital is an investment by Maiz: maiz.com.br