What Did the CMN Decide Regarding Precatório and Litigation FIDCs?
Brazil's National Monetary Council (CMN) has expressly prohibited Credit Rights Investment Funds (FIDCs) from making new acquisitions of lawsuits and precatórios (court-ordered government payment obligations). The regulatory ruling establishes a clear deadline for the market: the restriction takes effect on October 13.
The decision hits the high-risk structured credit segment directly. These funds had been using the FIDC structure as their primary vehicle to package credit rights originating from legal disputes and claims against public or private entities. After the established deadline, no new assets with these characteristics may enter the portfolios of these funds.
For investors following the evolution of structured fixed income, the measure concludes one of the most aggressive credit origination strategies in the Brazilian capital market, forcing a profound reorganization within the specialized management industry.
How Large Is FIDC Exposure to These Assets?
The financial volume allocated to this type of operation is in the billions. A survey conducted by market intelligence agency Tomé, based on monthly reports submitted to Brazil's Securities and Exchange Commission (CVM) through September 25, identified 423 FIDCs with exposure to these instruments.
According to data compiled by the consultancy, these 423 vehicles hold up to R$ 64.2 billion in lawsuits and precatórios, housed within a combined net asset value totaling R$ 111.4 billion. The inventory is divided almost evenly between the two fronts:
| Collateral Type | Volume (R$ Billions) | Regulatory Characteristics |
|---|---|---|
| Lawsuits | R$ 32.8 billion | Credit rights from ongoing litigation |
| Precatórios | R$ 31.4 billion | Judicial government bonds (issued and unissued) |
| Total Mapped | R$ 64.2 billion | Maximum aggregate portfolio ceiling for the 423 funds |
Tomé's survey highlights a crucial technical caveat regarding these figures: the R$ 64.2 billion represents the maximum theoretical exposure ceiling, not necessarily the exact total that will be immediately barred by the rule. This occurs because standardized monthly CVM reporting does not separate already-issued precatórios—which fall outside the CMN's restriction—from claims stemming from disputes still making their way through the judiciary system.
How Does the Rule Impact the 232 Funds Focused Almost Exclusively on This Strategy?
The greatest operational challenge falls on "single-strategy" funds. Of the 423 FIDCs mapped in the survey, 232 have more than 90% of their net asset value allocated to lawsuits and precatórios. Together, these 232 vehicles hold no less than R$ 41.5 billion.
For these ultra-concentrated funds, the regulatory restriction cuts off their primary origination pipeline. Without the ability to acquire new batches of legal proceedings starting October 13, the structure of these vehicles enters a gradual wind-down mode, operating solely on the collection and settlement of the remaining inventory already in their portfolios.
Concentration levels mapped across the industry:
- More than 90% of NAV: 232 funds (R$ 41.5 billion in committed net assets);
- Between 50% and 90% of NAV: 83 funds undergoing transition or partial reallocation;
- Less than 50% of NAV: 108 funds, where the impact on the aggregate portfolio tends to be diluted.
What Happens to Existing Units and Capital Already Allocated?
The CMN's ruling does not force managers to immediately liquidate assets that have already been purchased and paid in. The existing inventory of legal claims and precatórios may remain in the FIDCs' portfolios until the judicial cycle concludes or the issued orders are effectively paid.
However, the funds' dynamics change substantially. Because new cash flows cannot be reinvested in the same asset class, capital returns to unitholders—via scheduled amortization or the gradual wind-down of the vehicle—tend to accelerate as court judgments and settlements are paid out.
Investors positioned in the subordinated or senior units of these funds should closely monitor amortization schedules and management's ability to monitor legal risks without the flexibility to rebuild their portfolios.
What Are the Implications for FII and Traditional Income Investors?
The CMN's regulatory tightening on high-risk credit places a brake on yield strategies inflated by legal disputes. This movement directly affects the capital allocation flows of investors seeking periodic passive income and predictability.
With this capital-raising channel closing in structured FIDCs, a relevant share of the capital flow that previously accepted legal credit risk is likely to rotate toward more traditional, transparent income-generating assets backed by real collateral—such as real estate funds (FIIs) and traditional private credit instruments.
During a trading session in which the IFIX closed at 3,737.17 points (-0.12%), the regulatory compression on extreme-risk assets reinforces the appeal of established real estate funds trading at discounts to net asset value with predictable contractual cash flows. For retail investors, the regulator's message is clear: the pursuit of high yields in judicial credit will face much stiffer hurdles, reinforcing the preference for real estate income strategies and traditional credit with solid collateral.
