Known for their smaller size and low liquidity, small-cap stocks are rarely on the radar of large international funds, which generally seek exposure to the Brazilian market via ETFs linked to the Ibovespa or the MSCI Brazil.

Despite the unfavorable dynamics for the asset class, a survey conducted by Comdinheiro, the financial information system of the Nelogica group, at the request of NeoFeed , reveals a surprising resilience, even with constant outflows of local funds in recent years.

According to the data, the average daily volume of shares in the Small Cap index grew 19.3% between December 2022 and June 2026, while that of the Ibovespa fell 10.3% in the same period. As a result, the liquidity difference between the two indices, which reached 5.1 times in December 2022, fell to 3.8 times.

The survey considered the daily volume of all stocks comprising the Ibovespa and the Small Cap index on each date, respecting the quarterly rebalancing of each indicator. In other words, a stock that entered or left either index during the period was only counted in the months in which it was actually part of the portfolio.

In December 2022, Ibovespa stocks traded an average of R$ 20.5 billion per day. By June 2026, this volume had fallen to R$ 18.4 billion. In the Small Cap segment, the movement was the opposite: from R$ 4.0 billion to R$ 4.8 billion.

The growth occurred during the same period in which equity funds suffered accumulated redemptions of R$ 95.4 billion and the share of the entire industry's assets allocated to the stock market fell from 9.8% to 7.7%, with new money migrating to fixed income. On the other hand, the participation of foreign investors in trading volume on the B3 jumped from 54.9% to 60.5% — the highest level for a single year ever recorded by the B3.

The same trend is seen in ETFs that replicate the two indices. SMAL11, a fund that tracks the Small Cap index, saw its average daily trading volume grow by 262% between February 2023 and May 2026 — jumping from R$79 million to R$286 million per day, according to data from B3.

During that period, BOVA11, the country's largest ETF which replicates the Ibovespa, shrank by 24%. Today, SMAL11 is the second most traded ETF on the Brazilian stock exchange, behind only BOVA11 — in 2023, it occupied only the fourth position.

According to Gustavo Gukovas, business director at Comdinheiro, a possible explanation lies in the profile of the investor who dominates each index. Small caps are only available in the domestic market, while the largest Ibovespa stocks — such as Petrobras , Vale , and Itaú — are also traded through ADRs in the United States .

In June, the ADRs of these three companies alone traded US$876 million per day, according to data from JP Morgan, the ADR depositary bank. In total, Brazilian ADRs had an average daily volume of US$2.54 billion in June, according to Comdinheiro. This volume, in reais, represents approximately 71% of the volume traded in the same month by the stocks that make up the Ibovespa index and 44% of all spot trading of shares on the Brazilian stock exchange.

"It's much easier for foreign investors to access the market via the United States than to come and allocate directly here at B3," says Gukovas.

According to Luciano Boudjoukian França, founding partner and manager of Paramis Capital, the narrowing of trading volume between the shares of the two indices is strongly related to the loss of volume in the stock market.

In June, the average daily trading volume in the spot stock market was R$ 29.5 billion, 8.6% lower than that recorded at the end of 2022. In the partial data for July, the average volume is R$ 19.35 billion per day, close to the lowest levels since 2019.

“Vale and Petrobras have lost roughly 30% of their trading volume on the B3 [since 2023]. And today, Brazilian companies that trade in the United States account for almost 60% of the total volume on our stock exchange [considering ADRs and directly listed companies, such as Nubank and Mercado Livre ]. In 2021, it was 30%,” says França.

According to him, this migration helps explain why Brazilian companies have increasingly sought the American market to list themselves, as seen in the recent cases of JBS, which migrated from B3 to the NYSE , and PicPay and Agibank , which went public directly in the United States.

"There is a difficulty in generating business volume here domestically, which encourages local companies to issue assets abroad, seeking greater visibility, better pricing, and improved liquidity, ultimately creating a vicious cycle."

The migration of this liquidity to the United States is also reflected in the EWZ, the largest ETF of Brazilian stocks in the United States and one of the main vehicles used abroad to gain exposure to Brazil, which tracks the MSCI — another basket dominated by large caps , with significant weighting of Petrobras, Vale, and Itaú.

Like any other ETF, the EWZ destroys or creates new shares depending on demand, and between December 2022 and the first days of July this year, that number grew by 53.3%, according to data from the asset manager BlackRock. The fund's assets nearly doubled during that period, rising from US$4.7 billion to US$8.9 billion.

Methodology in favor

Another factor cited by managers that helps explain how Small Cap index stocks gained more liquidity compared to the Ibovespa, even in this adverse scenario, lies in the portfolio composition methodologies.

According to B3 rules, the Ibovespa index includes assets that, when added together in descending order of negotiability, represent 85% of the total traded in the spot market across the three previous portfolios.

The Small Cap index includes stocks that are not among those that make up 85% of the market value of all companies listed on the B3—that is, smaller companies in size, not necessarily in liquidity. Because the criteria are different, the same stock can be included in both indices simultaneously.

The practical effect is a constant renewal of the Small Cap portfolio. Of the 134 stocks that made up the index at the end of 2022, 58 left. 34 new ones entered, 13 of them coming directly from the Ibovespa. Among them are Lojas Renner , Totvs , Multiplan , Hapvida , Hypera , Cosan and Magazine Luiza .

Seven other stocks were already in the index and were also part of the Ibovespa that year, but they left the main B3 index — cases of CVC , Dexco , Ecorodovias , EzTec , Locaweb , Qualicorp and Méliuz .

For Daniel Utsch, manager at Nero Capital, this composition dynamic is key to understanding the data — and calls into question the interpretation that small caps themselves have gained liquidity.

“Renner entered the Small Cap index about a year ago. Today, it is one of the largest holdings in the index, with a 4.5% share. But nobody in the market would classify Renner as a small cap — it is seen as a large, relevant company on the stock exchange,” says Utsch.

He points out that part of this migration between indices is also explained by the concentration of the stock market's rise in a few stocks — most notably Petrobras . Since the end of 2022, PETR4 has accumulated an appreciation of around 75%. Today, the state-owned company alone accounts for more than 11% of the entire market value of the stock exchange, helping to pull other companies below the 85% threshold that defines entry into the Ibovespa.

Eduardo Carlier, co-director of Azimut Brasil Wealth Management, endorses the argument. "The composition and the rule for how you calculate the index largely account for narrowing this difference."

According to him, the effect is visible in companies like Totvs and Multiplan — companies that were once considered mid or large caps and today are included in the Small Cap calculation with significant weight and volume from day one.

On the other hand, stocks that have depreciated to the point of becoming penny stocks or have entered bankruptcy proceedings have also left the Small Cap index in recent years — cases such as Azul, Gol, and Light, all excluded for failing to meet the minimum inclusion criteria in the B3 indices.

“Many companies have also disappeared from the Small Cap Index. Those from the last wave of IPOs have been practically eliminated downwards,” says Carlier.

Not every movement in the composition of the indices follows this direction. Copasa, currently the largest component of the Small Cap index with a 6.9% share, took the opposite path to Renner and Totvs. The company was privatized in 2024, which increased its liquidity to the point that its stock also entered the Ibovespa index—even without leaving the Small Cap index.

"Being included in the Ibovespa index remains the desire of every listed company," said the investor relations manager of a publicly traded company present in several B3 indices, who asked not to be identified due to internal policies of not commenting on share price and volume.

“Many foreign investors prefer to have this exposure via ETFs, which helps increase the liquidity of the stock. No large fund wants to be in a stock with low liquidity, because the exit is small. So liquidity also helps attract investors and increase the company's value,” he says.

Despite the reduction in the liquidity gap, Ibovespa stocks still together represent a volume 3.8 times greater than that of Small Cap stocks. The imbalance remains evident in the assets under management of ETFs that replicate the two B3 indices. BOVA11, the country's largest index fund, had R$ 13.2 billion under management on July 8, according to BlackRock data, while SMAL11 had R$ 1.6 billion — a difference of 8 times.