Reel coming soonPaper funds: the fund that lends moneyshort video · 9:16BeginnerBrazilian REITs · Lesson B3.2 · Module B3
Paper funds: the fund that lends money
Module B3: The types of FII
In this lesson
- How money flows through a CRI
- The IPCA + 7% a year math
- Default: the core risk of paper funds
Brazilian REITs · Lesson B3.2
The fund that lends money
No building to rent out. It holds debt contracts — with real estate behind them.
Follow the money
From the fund to the project, and back
- Developerneeds money to build
- Securitizerturns the debt into a CRI
- Paper FIIbuys the CRI
- Youreceive the interest as income
CRI = Real Estate Receivables Certificate: a debt security tied to property.
Read the rate
The yield is written on the CRI
- CDI + 2%
- IPCA + 8%
- 110% of CDI
CDI tracks the Selic policy rate. IPCA tracks inflation.
Do the math
What a R$ 10 million CRI pays
Multiply, don't add: 4.5% + 7% would give 11.5%. Illustrative figures.
The two indexes
CDI or IPCA: what moves the income
CDI-linked CRI
- Selic goes up: pays more
- Selic goes down: pays less
IPCA-linked CRI
- Protects against inflation
- Deflation month: pays less that month
Month by month
Monthly inflation changes what comes in
R$ thousand per month on a CRI at IPCA + 7%. Below, that month's IPCA. With deflation, only the interest comes in.
The main risk
When the borrower doesn't pay
- Defaultthe borrower stops paying
- Collectionthe collateral is enforced
- The fund takes the propertyland, project or building
- Saleand it may not cover the debt
The myth
“Paper funds have no real estate risk”
They do. Behind every CRI there's a property — and that's what's left when the borrower goes under.
Collateral, borrower and rate are covered in lesson I4.7.
Remember this
Three ideas from this lesson
- Interest incomeA paper fund buys real estate debt, such as CRIs.
- The index rulesCDI follows the Selic. IPCA follows the month's inflation.
- Default is the riskIf the borrower doesn't pay, the collateral is left — and it may be worth less.
Quick test · 1 of 2
CDI-linked CRIs tend to pay more when…
See answer
The Selic goes up. The CDI moves with it and the CRI's interest follows — as long as borrowers keep paying.
Quick test · 2 of 2
CRI at IPCA + 6%, with 5% IPCA in the year. What does it pay?
See answer
1.05 × 1.06 = 1.113, that is, 11.3% in the year. Inflation and interest multiply.
Lesson complete
Next lesson
B3.3Beginner · Lesson B3.3Funds of funds and hybridsOne share, many funds inside — and two fees along the way.Continue1 / 12
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Image credits
- Karola G · Pexels · Pexels License — Pexels
- Wilfredor · Wikimedia Commons · CC0 1.0 — Wikimedia Commons
Educational content, written for learners. Not investment advice.