AgroGalaxy , a group that owns one of the largest agricultural input distribution networks in the country, has shaken the market for Investment Funds in Agro-industrial Production Chains, known as Fiagros. The company, controlled by the asset manager Aqua Capital, filed for judicial reorganization on Wednesday, September 18th, and funds exposed to the securities of the agricultural reseller network were impacted.
The XPCA11 fund, from XP, has accumulated a 10.14% devaluation in five days, up to September 24th. And the JGPX11 fund, from JGP, has accumulated a 15.8% drop in the same period. The good news for investors is that the problem was isolated. And the Fiagros funds, which today have more than R$ 40 billion under management, continue to be important in asset diversification and in attracting retail investors and high-net-worth individuals due to the income tax exemption on their dividends.
Created in 2021, there are three types of Fiagros available: FIDCs (Credit Rights Investment Funds), which invest in agribusiness credit rights; FIPs (Private Equity Investment Funds), which invest directly in companies; and the most common, Fiagro-FIIs (Real Estate Investment Funds), whose legislation and operation are derived from real estate funds .
The difference is that the underlying assets of Fiagros funds are always linked to agribusiness. There are Fiagros REITs focused on buying debt securities, such as Agribusiness Receivables Certificates ( CRAs ) and Agribusiness Credit Letters ( LCAs ). And there are those that invest in equity, buying land or real estate related to the agricultural sector in search of appreciation of these assets, as well as their returns.
“The CVM was very effective in regulating this new instrument, using others it already had to expedite the process and allow the market to develop, making it an important funding instrument for agribusiness,” says Bruno Lund, director of Ecoagro, to Wealth Point , a NeoFeed program.
However, new regulations for Fiagros are expected, which will definitively establish this new asset class and introduce a new segment, the multi-market segment, that will be able to invest in different assets related to agribusiness. It is expected to be released later this year.
The financial market expects this to bring more flexibility for managers to allocate resources and further boost the agricultural industry, which has enormous potential. Agribusiness accounts for about 25% of the country's GDP, requiring approximately R$ 1 trillion per year for financing.
“That’s Brazil’s calling, to be the breadbasket of the world. It makes no sense to live here and not be exposed to the best that the country’s economy has to offer,” says Vitor Duarte, CIO of Suno Asset.
Despite the euphoria, investors have been experiencing some shocks with the increase in requests for judicial reorganization in agribusiness. This was caused by crop failures and a lack of maturity on the part of some producers and entrepreneurs in dealing with this type of credit. But the number of cases is very small compared to the market, representing about 1%. And there is no shortage of strategies for managers to protect themselves.
“There are various ways to gain exposure to agribusiness. In fact, strategies aimed at directly financing rural producers carry more of the climate risk associated with the business than other production chains. But it is possible to demand guarantees and other instruments,” says Lund.
Both managers believe that the Fiagros funds can, in the coming years, surpass real estate investment funds , an investment class created in 1993 that today holds R$ 330 billion under management – about eight times more assets.
"Fiagros may be traveling on a paved road, but they are moving much faster than real estate funds, demonstrating the interest of both companies and investors in this instrument," says Duarte.
