“It’s a lot of liquidity in a very short period of time and without sufficient assets to back it,” said Samy Botsman, a managing partner at Fami Capital. “Some of it will go into Treasury Direct bonds, some into funds, but the market doesn’t have R$40 billion in assets to reallocate all at once.”

Botsman added that a bank failure significantly undermines investor confidence and that small and mid-sized institutions tend to face greater difficulty in raising funds. Yields offered by stronger issuers, in turn, are likely to decline, squeezing returns for investors.

Even before the funds were released, advisory firms and major investment platforms had already begun efforts to ensure that eligible investors listed accounts at their own institutions when registering to receive FGC payments.

Fernando Katsonis, a partner and chief executive of Lifetime, which is connected to BTG Pactual’s network, described the situation as a “significant liquidity surplus,” noting that some institutions may fail to retain part of the funds as the money flows back into the system. “XP had a much larger volume [of Banco Master CDBs] than others and, obviously, is the one that stands to lose the most when the funds return. Everyone is running product campaigns to attract more money. Our mission is to bring in twice what we had before.”

XP is the largest distributor of securities issued by small and mid-sized banks and held about 70% of the assets issued by Banco Master and Will Financeira—which was not liquidated—totaling more than R$30 billion. BTG Pactual held R$6.7 billion, while Nubank also carried Banco Master paper on its platform, with nearly R$3 billion outstanding.

Katsonis said both BTG and XP have been offering short-term alternatives, including CDBs, as the market has fewer offerings available at the start of the year. “There’s the Claro transaction [R$3 billion in debentures], secondary-market fixed income or government bonds,” he said. “After a bad experience with CDBs, investors shouldn’t be moving into anything that isn’t top tier. They want blue-chip bank CDBs or government securities.”

André Albo, a founding partner at Alta Vista Investimentos, also sees an excess of liquidity hitting the market over a short period. “There won’t be enough products for that amount of money,” he said. “So our recommendation is to keep it in liquid fixed income and allocate it gradually over the coming weeks.” He added that tax-exempt fixed income, international investments and public offerings of debt securities or private credit funds are likely destinations for the funds.

Some investors may still be willing to roll into new CDBs, but with yields at rock-bottom levels, that is unlikely to be the most obvious path, Albo said. “Mid-sized banks have raised a lot of funding in recent months. Since they’re no longer as hungry for funding, they’re lowering rates.”

Guilherme Mendes, head of fixed income at Blue3 Investimentos, part of XP’s network, said Banco Master’s CDBs had won over investors because they combined very attractive yields with the backing of the FGC guarantee — “which at the time seemed like an appropriate risk-return trade-off.” Now, with the guarantee being paid out, the market is facing an “extremely significant and concentrated financial movement that is likely to intensify over the coming weeks.”

The Banco Master episode, Mendes added, “shines a light on the fact that poor allocations — even when backed by potential guarantees — can and will generate discomfort, noise and reactive decisions that are not, or should not be, appropriate when building a portfolio.” “Our role is to prevent this kind of situation from happening again,” he said.

This is now a moment to rethink portfolios based on each client’s profile and objectives. Liquidity needs, risk tolerance and time horizon should factor into the assessment, guiding the allocation of resources with discipline and responsibility, the Blue3 executive said. That means there is no single reallocation recommendation or “miracle” asset to which the funds should be directed. “Each portfolio has its own complexity, and the investment rationale is handled at the micro level, in the relationship between advisor and client, respecting the individuality of each portfolio and its objectives.”

Looking at the macroeconomic backdrop and market guidelines for 2026, Mendes said the funds are likely to remain in fixed income. “There is an anchor in place, with strong expectations of interest rate cuts over the cycle,” he said. “It tends to be a year in which returns in Brazil will come much more from asset repricing — from the cost of money — than from any other internal or external variable.” In his view, inflation-linked and fixed-rate assets are set to gain prominence, with real interest rates at historically high levels.

At Miura Investimentos, an advisory firm in BTG’s network, appetite is also focused on fixed income, according to co-founder Diego Ramiro, “taking advantage of the fact that the Selic rate is high and the yield curve is set to flatten.” Government bonds, bank products and AAA-rated private credit are the preferred choices, he said. “We’re advising clients to invest as soon as possible because once the money is released, demand will be very high and rates will compress. There’s R$40 billion entering the market, and there aren’t enough products to absorb it all.”

*By Adriana Cotias, Valor — São Paulo

Source: Valor International

https://valorinternational.globo.com/