BRAZIL Law and Practice Contributed by: Ihury Bastos Pereira Darmont, Filipe Starzynski, Karyn Yoshisaki, Ariel Goldstein and Artur Marangoni Cabral Fagundes, Darmont Advogados
are the most effective structures within the alternative investment funds markets, without limitation: • Financial Investment Funds – vehicles that invest primarily in traditional assets, particularly liquid assets, and that can be subclassified into: (i) fixed income funds, which seek returns through invest - ments in fixed income assets, allowing strategies that involve interest rate and price index risk; (ii) stock funds, which will have in their portfolio, primarily, variable income assets, such as stocks, share and bond deposit certificates and subscrip - tion receipts; (iii) exchange funds, which must invest at least 80% of their portfolio in assets – of any credit risk spectrum – directly related or syn - thesised, through derivatives, to foreign currency; and (iv) multimarket funds, funds with investment policies that involve several risk factors, without the commitment to concentrate on any particular factor. Nonetheless, multimarket funds are often used, direct or indirectly, within alternative invest - ment funds structures. Regarding multimarket funds, such vehicles are often used as part of the alternative structures as a car - rier or a feeder fund to invest in the funds mentioned herein. Nonetheless, there are multimarket investment funds that can, by their own structure, be created just for specific credit investment, being, in these cases, structures for alternative investments. • Credit Rights Investment Funds (FIDC) – these are investment vehicles that invest most of their net assets in credit rights. These credit rights can be of several types, such as trade notes, assignments of rights of all sorts, commercial notes, debentures, structured-finance instruments, cheques, and credit card receivables, among others. In Brazil, Credit Rights Investment Funds are a very strong and developed financial instruments used within proprietary and third-party financial structures and projects. • Real Estate Investment Funds – investment vehi - cles established for investment in real estate projects, such as real estate companies, real estate credit rights and all sorts of properties. • Investment Fund for Agroindustrial Production Chains – investment vehicles established for
investment in the agro-industrial production chains, serving as vehicles that can focus on agro-indus - trial real estate, credits and/or companies of the segment. • Private Equity and Venture Capital Investment Funds – investment vehicles established for invest - ment in publicly held or privately held companies and/or limited liability companies. Regardless of the above, it should be highlighted that there are specific laws, provisions, and characteristics that must be observed when establishing, structuring, and in the day-to-day operations of each investment fund. 2.2 Regulatory Regime for Funds In Brazil, alternative funds must comply with the regu - lations applicable to them, issued mainly by the CVM (particularly Resolution No 175). The structuring of an investment fund occurs through joint deliberation by its fiduciary administrator and its resource manager, who are responsible for drafting and approving the vehicle’s bylaws, and the fund’s operation is automatically granted as a result of the submission of documents and information by the fiduciary administrator through the CVM’s electronic system. Therefore, there is no prior authorisation from the CVM, ie, the fund’s operation does not need to be approved in advance by the CVM but rather depends on the fund’s registration with the CVM, which is granted automatically by sending the applicable documents and information, as mentioned above. The constitution/registration of the fund is therefore procedural – once the bylaws are ready, the service providers are defined, and the registrations are com - pleted, the vehicle is quickly created and becomes subject to ongoing supervision by the CVM. The pace at which the fund’s quotas go to market depends mainly on the documentation logistics and, if there is fundraising, on the offering process. In offerings, time - lines may vary depending on certain variables such as the vehicle’s target audience, whether the offering allows for reservations, bookbuilding procedures, and
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