BRAZIL Law and Practice Contributed by: Guilherme Bueno Malouf, Luciana Costa Engelberg, Bruna Marrara and Thales Saito, Machado Meyer Advogados
1. Market Overview 1.1 State of the Market
The changes promoted by CVM Resolution 175 and recent tax reforms, which also brought beneficial changes for foreign investors, are expected to positively impact the investment fund industry in 2024. CVM Resolution 175 represented an important milestone for the evolution of the fund industry in Brazil, intending to reduce bureaucracy and costs and increase security for investors, bring - ing the industry closer to practices adopted in other jurisdictions, including, eg, the limitation of the liability of investors (up to the limit of the value of their quotas), the creation of different classes of quotas with segregation of portfolios, and the application of insolvency rules provided for legal entities in general (ie, investment funds are directly responsible for their legal and con - tractual obligations). 2. Alternative Investment Funds 2.1 Fund Formation 2.1.1 Fund Structures Investment funds in Brazil are regulated by CVM under federal laws No 6,385 of 7 December 1976 (Securities Law) and the Brazilian Civil Code. CVM is a governmental agency of the Ministry of Economy and is responsible, inter alia, for moni - toring the investment fund industry and issuing regulations. Resolution CVM 175 is composed of a general part applicable to all categories of investment funds in Brazil and annexes with specific rules applicable to the different categories of invest - ment funds, such as financial investment funds (FIFs – ie, fixed income fund, equity fund, multi - market fund and foreign exchange fund), asset- backed securities funds (FIDCs), private equity
The investment funds market in Brazil is very active and has become more sophisticated in the last decade – especially with the enactment of CVM Resolution 175 of 23 December 2022, which changed the regulatory framework appli - cable to investment funds in Brazil, as well as CVM Resolution 214 of 30 September 2024, which amended CVM Resolution 175 and cre - ated a specific regulation for agriculture invest - ment funds. The rise in the interest rate in the last couple of years, following a rise in inflation, has caused retail investors to avoid risks with variable- income investments, leading to further invest - ment in fixed-income assets. According to publicly available data published by the Brazilian Financial and Capital Markets Association (ANBIMA), a private and voluntary self-regulatory association, the consolidated net equity of investment funds amounted to BRL9.3 trillion as of 8 November 2024. According to the latest ranking from the Interna - tional Organization of Securities Commissions (IOSCO), Brazil is the fourth major capital mar - ket in the world in terms of the investment fund industry. Notwithstanding the negative result in net fund - ing in 2024 for the total funds industry, the alter - native funds had positive results with investment in FIDCs totalling BRL33.8 billion and in FIPs totalling BRL27.5 billion until November 2024. With the government’s intention to increase the interest rates for 2025, the perspective for 2025 is positive for fixed-income investments.
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