Retail investors in Brazil are investing in exchange-traded funds (ETFs) at record rates amid a wave of new products expanding the market. According to the local exchange B3, the number of retail investors placing funds in ETFs grew by 39% year-on-year, reaching a record 914,000 in August. The number of available ETF products over the same period increased by 55% to 219.
“ETFs have reached a tipping point in terms of growth in Brazil,” said Felipe Paiva, Managing Director of Client Relations and Retail Investment Strategy at B3. “We are approaching the milestone of 1 million people having ETFs in their portfolios, and for us, this is a very significant figure.” Among the most traded ETFs is BOVA11 from BlackRock, which tracks stocks from the Ibovespa index. Its average daily trading volume in August was 671.6 million reais (about $131 million), accounting for 41.5% of the total ETF turnover.
However, the main favorite among investors over the past year has been debt ETFs amid interest rates above double-digit values. In such conditions, retail investors avoided riskier assets, including stocks, causing their share to drop to historic lows. Since the beginning of the year, debt ETFs have attracted more than 27.3 billion reais, surpassing equity funds in total assets, according to Anbima, the Brazilian Financial and Capital Markets Association. Debt ETFs typically charge lower fees and are exempt from the tax collection system, where investors prepay income tax twice a year—a common practice in traditional funds.
Despite the growth in retail participation, institutional investors continue to dominate: in August, they accounted for 52.5% of ETF turnover, followed by foreign investors with 28.8% and individuals with 14.9%, according to B3. “People are starting to realize that such products exist, and on the supply side, banks, brokers, and financial advisors are increasingly including ETFs as an allocation option in investment portfolios,” noted Paiva.
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