Funds, shares, receivables: how to invest in agribusiness, a sector that is experiencing a “virtuous cycle” of growth
(Paulo Fridman/Corbis via Getty Images) SAO PAULO – Agribusiness has definitely entered the radar of investors looking for diversification. The growth of the sector, one of the few to go through the coronavirus pandemic without concussions, places it in what economists have called a “virtuous cycle” – and, therefore, there are more and more options for agro-related applications in the market. As a result, some companies in the segment are creating goals and establishing commitments related to the reduction of greenhouse gas emissions and the non-production on land from deforestation, which arouses the interest of investors who are attentive to environmental, social and governance protection practices (ESG) of companies. According to Anbima (Brazilian Association of Financial and Capital Markets), the volume of issuance of Agribusiness Receivables Certificates (CRA) increased almost 40% in the 12 months ended in June 2021, compared to the same period last year, reaching R$ 18.26 billion. This year alone, from January to June, there were R$8.73 billion, against R$5.65 billion in 2020. As CRAs are papers exempt from income tax (IR) for individuals, these bonds have gained preference investors – but not just them. Options also advanced on the Stock Exchange, in international issues and in funds with assets only from companies in the sector. This year, there were three IPOs (initial stock offerings) and a subsequent offering at B3, exceeding R$ 2 billion in shares bought by investors.Read too:In the international market, the green bonds of JBS (JBSS3), issued in June in the amount of US$ 1 billion, are linked to the commitment to control and reduce 30% of greenhouse gases per ton of product sold by 2030. “If until 2025 it does not fulfill part of this, the premium rate paid to the investor increases by 0.25% per year. Today, the yield is 3.75% per year and the coupon is 3.62% per year”, observes Sofia Caccuri, investment manager at Quasar. “pure blood” agro funds. In February, the largest manager in the country, BB DTVM launched its first portfolio focused on the sector – BB Ações Agro – which has already raised almost R$ 400 million and reached 9,332 investors. It is a fund with 40 domestic and foreign agribusiness companies – 13% of the equity is allocated in BDRs (Brazilian Depositary Receipts, receipts for foreign shares traded on B3). The fund, which is open to investments starting at R$1, has an administration fee of 1% per year and a performance fee of 20%. “The company’s revenue must be directly linked to agribusiness or be highly dependent on it. It is an excluding requirement”, says Marcelo Arnosti, head of multimarket, equities and offshore fund management at BB DTVM. For him, the sector attracts not only because it is cyclical – growing with the recovery of the global economy – but also because of the best organization it is presenting for adopting ESG practices. “Companies in the sector have been more transparent in approaching and communicating with the managers. This has facilitated our analysis in the choice of assets, and also helped the success of IPOs and attracted investors”, says Arnosti.Since 2015, 121 debts with ESG metrics, totaling R$43.7 billion, were issued by Brazilian companies. The growth was 241% between 2019 and June 2021, compared to the same period before. Of this total, 32 issues are related to agribusiness, or R$ 7 billion, which represents 16% of issues, according to a survey carried out by Sitawi Finanças do Bem. discards new funds only with sector papers. “It’s a good time for that. And it helps a lot to diversify the portfolio. These funds make it possible to capture the potential of the agribusiness chain”, he says.
The new Fiagro, or Investment Fund in Agro-industrial Productive Chains, a modality exempt from Income Tax and released by the Securities Commission (CVM) since August 1, should also thicken the queue of issues related to the sector. In the opinion of analysts, houses of investments and banks, Fiagro has the strength and potential to become as relevant as the also exempt real estate investment funds (FIIs), which already total more than R$ 123 billion in equity. For XP, which participated as leader of the IPOs of Jalles Machado (JALL3) and Boa Safra (SOJA3), in addition to the subsequent offer of Brasil Agro (AGRO3), Fiagro adds to other options that the investor will have in the second semester to invest in agribusiness. In XP’s pipeline, there are at least 15 more CRA emissions in the oven and five companies are preparing to go public at B3. “These companies started to gain more scale in the base of investors and borrowers due to the transparency and governance that they are starting to show”, says Pedro Freitas, partner at the brokerage’s investment bank. He recalls that since 2013 there has been no IPO in the sector, but now companies are getting better organized to access the capital market. and it mitigates the negative impacts it causes, concerned about carbon emissions”, observes Freitas.Read too:Quasar anticipated this movement and, in 2019, launched QAGR11, the first agribusiness logistics real estate fund, which has a net worth of BRL 300 million, is listed on the Stock Exchange and has more than 17,000 shareholders. “We want to follow-on [nova oferta] of this fund in the second half, with an additional funding volume expected between R$ 100 million and R$ 150 million”, says Sofia Caccuri, investment manager at Quasar. The fund, accessible to investors starting at R$50, has an authorized capital of R$10 billion and has assets from the companies Belagrícola and BRF. The manager warns, however, that investors are more demanding and that it is not just any role of the sector that is absorbed. She says that the preference is for assets from low-carbon companies that protect the environment. “Companies have realized this and are starting to set goals. Marfrig (MRFG3), for example, wants to track the entire chain so that it is free from deforestation in the Amazon until 2025 and in the cerrado until 2030. It would be important that they also have short-term goals”, observes Sofia. Premieres at B3 such as the AgroGalaxy platform (AGXY3), for agricultural inputs, at the end of June, reinforce the opinion of those who defend that there is room for different companies in the sector’s chain. The IPO raised R$350 million and had broad investor participation. “We have ten proposals in the pipeline for CRIs from agro and other sector emissions to make up the funds. If they come to the market, they will represent around R$ 200 million in new assets for the investor”, says Sofia.
From Minas to Piauí
In the same direction, 051 Capital will launch this year an agricultural real estate fund aimed at investors who seek the manager in search of portfolio diversification in sustainable companies. The manager will buy rural properties in areas with great potential for appreciation – particularly in western Bahia and Tocantins, as well as Mato Grosso, Minas Gerais and Piauí – and will lease them. The fund’s objective is to generate an annual income to the investor through property leasing revenue, with real appreciation of the price of soybeans and agricultural areas, in addition to working as a foreign exchange hedge, since the price of the commodity is linked to the variation of the dollar. “We have R$1.2 billion under management and investors asked for alternatives. We decided to buy agricultural areas and develop a fund with capital of R$ 150 million. We are looking at open farms with regularized areas, consolidated crops and ESG commitments”, says Bernardo Reis, head of agro at 051 Capital. The executive says he already has 20 farms under evaluation. This is the first agribusiness fund in the manager. “Other advantages for investors are low volatility, protection against inflation and an efficient tax structure”, says Reis.With a R$ 48 million equity fund launched 15 years ago, Sparta was one of the pioneers to bet investments backed by securities of companies in the sector. Sparta Cíclico has shares in companies such as SLC Agrícola (SLCE3), São Martinho (SMTO3), Randon (RAPT4) and JBS. With a minimum ticket of R$1,000, an administration fee of 2% per year and a performance of 20%, the strategy of this multimarket fund is to invest in stocks linked to commodities. while the Ibovespa gained 6.5%”, says Artur Nehmi, fixed income manager at Sparta Investimentos. The manager explains that the fund, with 1,400 shareholders, benefits from the rise in commodity prices and the strong dollar against the real. “This makes the sector very attractive. We are at the beginning of a virtuous cycle and it is natural that the demand for agricultural titles is greater because the perspective of the sector is very favorable”, he says.