ETFs Drive Brazilian Capital Market

In August, ETF assets in Brazil jumped to R$ 137 billion, a 110% growth compared to the previous year, according to data released by B3. The increase reflects growing interest from institutional investors—who hold 58.1% of this value—and individuals, who account for 29.1%.

what changed in the capital market

BOVA11, the ETF that replicates the Bovespa index, was the most traded, accounting for 41.51% of total trading. Other important ETFs include SMAL11 (11.92%) and BOV11 (6.45%). Monthly trading volume reached R$ 1.6 billion.

the role of institutional investors

Institutional investors hold the majority of positions in custody, both in ETFs and ETF BDRs. In August, 68.8% of ETF BDR positions belonged to institutional investors, while 26.5% belonged to individuals.

regulatory and tax challenges

Despite the growth, ETF assets still represent only 1% of total traditional funds in Brazil. B3 points out that outdated tax rules and the lack of regulation for actively managed ETFs are hurdles to more consistent growth. Tax legislation, based on rules from the 2000s, still penalizes fixed-income ETFs with variable tax rates from 15% to 25%.

the future of ETFs in the country

Local and international experts recognize the growth potential of ETFs in Brazil, with expectations of reaching R$ 1 trillion by 2030. For this to happen, B3 and CVM need to adjust rules that allow the offering of actively managed ETFs and the inclusion of currently prohibited products, aligning the Brazilian market with what happens in the United States.

With information from Estadão, Seu Dinheiro.