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BeginnerBrazilian REITs · Lesson B4.5 · Module B4

Is a FII safe? Is there a guarantee?

Module B4: Your first share

11 slides~5 minquiz at the end

In this lesson

  • What protects you and what doesn't exist
  • Why promising income is prohibited
  • The math of a tenant moving out
See the slides
Empty office floor with no furniture

Brazilian REITs · Lesson B4.5

Is a FII guaranteed?

No: not your money back, not the income. See what protects you — and what doesn't.

The shareholder's shield

What protects you and what doesn't exist

What protects you

  • Assets kept apart from the administrator's
  • Oversight by the CVM (securities regulator)
  • Audited statements and mandatory reports
  • Shareholder meetings

What doesn't exist

  • Deposit insurance (FGC)
  • Redemption whenever you want
  • Guaranteed income

Deposit insurance

The FGC doesn't apply here

R$ 0

of FGC coverage for investment fund shares

Brazil's FGC covers bank deposits and bank-issued securities, like savings and CDBs. FII shares are left out.

Red flag

Promising income is prohibited

Heard “1% a month, guaranteed”? Be wary: the law bans promising a predetermined return to shareholders.

Law 8,668/1993, art. 12, VI.

Where money gets lost

The paths to a loss

  • Vacancy or defaultincome vanishes, costs stay
  • Fund debtinstallments get paid before shareholders
  • Dilutive offeringnew shares sold cheap
  • Rising ratesthe share falls (lesson B4.4)

Plus: overpaying for a property, and fraud.

An example

The only tenant moved out

  1. 1.00Jan
  2. 1.00Feb
  3. 1.00Mar
  4. 0.30Apr
  5. 0.30May
  6. 0.30Jun

Income in R$ per share. With no rent, only interest on cash and the lease penalty remain.

Do the math

What happens to R$ 10,000

R$ 10,000÷R$ 100per share=100shares
100×R$ 0.30was R$ 1.00=R$ 30per month (was R$ 100)
100×R$ 60the share fell=R$ 6,000was R$ 10,000

Nobody has to make up the difference. Illustrative figures.

Remember this

Three ideas from this lesson

  1. No guaranteeNo FGC, no redemption, no promised income.
  2. There are protectionsSegregated assets, CVM, audits, reports and shareholder meetings.
  3. Safety is understandingKnow what can go wrong and size your bet accordingly.

Quick test · 1 of 2

A salesperson says the FII “guarantees 1% a month”. That is…

See answer

Prohibited. Law 8,668/1993 bans the administrator from promising a predetermined return. Income depends on what the fund actually collects.

Quick test · 2 of 2

The share went from R$ 100 to R$ 60. Who covers the difference?

See answer

Nobody. FII shares carry no capital guarantee. The loss only goes away if the price recovers.

Lesson complete

Next lesson

B4.6Beginner · Lesson B4.6Is FII income tax-free? Almost alwaysIncome is tax-free under four conditions; profit on a sale pays 20%, with no R$ 20k stock allowance.Continue
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Image credits
  • Andrea De Santis · Pexels · Pexels License — Pexels
  • Tara Winstead · Pexels · Pexels License — Pexels

Educational content, written for learners. Not investment advice.