When Genial launched its private banking business three years ago, the goal was to bring the firm's investment banking expertise to the synergistic business of wealth management. Since then, the vertical has more than tripled its total assets under management, and the wealth and private banking area has surpassed R$ 15 billion. Now, the focus is on credit structures for a new leap forward.
Today, structured strategies for Investment Funds in Credit Rights ( FIDCs ) within the wealth and private banking area alone total more than R$ 2 billion. The firm has around 20 funds of this type and a pipeline of at least ten more to be launched in the first half of this year.
The expectation is that this volume could double by the end of this year, which will contribute to the goal of reaching between R$ 18.5 billion and R$ 19 billion under management in wealth and private banking.
“It’s a capital solution that appeals to both those who need money and those who have resources to allocate in a diversified, low-risk way,” says Cláudio Massari, head of wealth management at Genial, to NeoFeed .
The growth of FIDCs (Investment Funds in Credit Rights) within Genial gained momentum following two market changes. The first was the alteration in the taxation of exclusive funds and offshore entities, which spurred high-net-worth clients to take action.
According to Massari, many investors maintained outdated structures, with portfolios concentrated in funds of funds, multi-market funds, and stocks that were no longer delivering the same performance. But the regulatory change made them rethink.
The second was the creation of the so-called "95%" funds, multi-market structures that maintain at least 95% of their portfolio in assets such as FIDCs, FIPs and FIAs and, therefore, preserve the exemption from withholding tax.
“Virtually all of our exclusive fund clients opted for this modality,” says Massari. “And all of them, in some way, built structures that had some percentage of FIDC (Credit Rights Investment Fund) to make up that 95% percentage.”
It was in this environment that Genial created a vertical focused on structuring products for high-income clients. The strategy isn't limited to FIDCs (Investment Funds in Credit Rights), but receivables funds have become the main product.
The area, which started with one dedicated person, already has four professionals and is hiring two more. The expectation is to reach the end of the semester with six people focused on selecting originators, analyzing investment theses, and structuring funds.
The model works by connecting with companies and business families that have receivables or credit rights to transform into funds. The originators contribute with subordinated shares, assuming part of the risk of the structure.
In practice, the FIDC (Investment Fund in Credit Rights) becomes more than just an investment product. In some cases, it's a way to balance the liquidity of family businesses. The family, which often concentrates liquidity in the hands of the individual, can help finance its own company by purchasing receivables from the business and then share this with the market.
In other cases, companies within the same group use FIDC (Investment Fund in Credit Rights) to connect cash-generating companies with others that need capital, reducing dependence on banks and the cost of raising capital.
Cláudio Massari, head of wealth management at Genial.
“One of the functions of the FIDC (Investment Fund in Credit Rights) is to address the issue of liquidity in companies, at a time when a large part of these families' liquidity is held by individuals and not by the company,” says Massari. “This ends up forming a very interesting virtuous circle. And as we are a large asset manager and administrator, we can do this at very attractive costs.”
Attraction mechanism
This circle has also become a customer acquisition tool. By bringing the originator into the structure, Genial not only gains a product partner, but often also the originator themselves, their partners, and executives as private clients.
Massari cites the case of an originator who already had a FIDC (Investment Fund in Credit Rights) at another firm, but couldn't grow because it wasn't raising capital for the senior tranche. By migrating the structure to Genial, the firm was able to raise capital for the fund. At the same time, the 12 tranches linked to the originator became Genial clients and purchased other products from the platform.
The strategy also aligns with a shift in investors' portfolios. With strong demand for tax-exempt assets, such as CRIs, CRAs, and incentivized debentures , rates have been compressed and, in Genial's view, have ceased to adequately compensate for credit risk in some cases. Throughout the first quarter, the firm reduced its positions in tax-exempt assets and increased its exposure to FIDCs.
Even with the 15% tax on redemption or amortization, Massari states that the spreads of FIDCs (Investment Funds in Credit Rights) and the credit quality compensate for the loss of the exemption:
"We had already come to understand that FIDCs, even paying 15% income tax, more than compensated for the fact that they were not exempt, also due to the deferral," he says.
The theses that have seen the most demand involve court-ordered payments, payroll loans, legal claims , and specific supply chains. The firm has also seen interest from other single and multi-family offices, which have started buying senior tranches and, in some cases, mezzanine tranches of the funds structured by Genial for their clients or from outside sources.
Today, private banking serves clients with assets of at least R$3 million, while wealth management is closer to R$10 million. The difference lies in the sophistication of the service: discretionary management, tax and estate planning, consolidation of multiple custodians, and analysis of portfolios held in other institutions.
Today, competition comes less from large traditional banks and more from investment advisory firms and independent structures that have grown in the wake of these platforms.
Massari says that Genial "flies a little under the radar" of the larger firms, but has managed to attract clients mainly from larger consultancies and some banks.
"The market over the last two years has been very much a game of chance," he says. "In this back-and-forth, fortunately we've won much more than we've lost."
