Investment Funds and Agribusiness: a new frontier for private capital

Investment Funds are well-known mechanisms for those who seek to invest their resources in the capital markets. They operate as a collective financial investment, that is, they bring together resources from several investors who will form part of a mass to be moved and invested together.

Thus, they consist of a condominium of resources contributed by investors, who will receive a return on their investment through the distribution of income by the fund or through the negotiation of their shares on the secondary market.

The sum of the amount invested forms the fund's assets, invested by the institution or professional, so that decisions about “what to do” with the resources must comply with predefined objectives and policies.

With this brief introduction, we will analyze, more carefully, the Investment Funds in Agroindustrial Chains, known as FIAGRO. Established by Law no. 14.130/2021, is clearly inspired by the regulation of Real Estate Investment Funds (FII), but appears with the aim of expanding the scope of investments and, through improvements, generating greater attractiveness and flexibility.

FIAGRO now imports agribusiness, a mechanism already known in the economy and experienced by investors in the country. This new fund is intended for multipurpose action, as it is capable of acting from multiple angles within the Agroindustrial Chain (CAI). To give an example, it is possible to have liquid investments (Agribusiness Securities) as a scope, to be a private equity investment vehicle in limited partnerships and closed companies in the sector and to act as a focused real estate investment vehicle (it is worth mentioning, the Fund may even lease or dispose of acquired properties).

In addition to the greater insertion of agribusiness in the capital market, there are several advantages directly linked to the constitution of FIAGRO, such as: greater liquidity for rural producers, the expansion of professionalism in the sector and the acceleration of medium-sized companies with investment via venture capital and IPO (Initial Public Offering of Shares).

To facilitate the rapid creation of the first FIAGRO, the Securities and Exchange Commission - CVM issued CVM Resolution no. 39, which allowed the request for registration of the functioning of funds using the normative bases of other existing structured investment funds - namely, the FIDC (Credit Rights Investment Fund), the FIP (Participation Investment Fund) and the FII (Real Estate Investment Fund).

In this system, 3 categories of FIAGRO were created, each linked to the normative basis applied “by loan”: FIAGRO – Credit Rights, FIAGRO – Participations and FIAGRO – Real Estate.

The first of these, FIAGRO – Credit Rights, is the investment fund aimed at agro-industry that applies to credit rights, using CVM Instruction No. 356 as a normative platform. Due to the particular characteristics of the exploration of agro-industrial activity, the revenue of agricultural companies ends Being seasonal, it therefore has a high potential to support the maintenance of economic exploration, avoiding the absence of capital that compromises activities.

FIAGRO - Imobiliário is permitted to acquire real estate assets and securities that are at the intersection between the real estate and agribusiness universes (for example, certificates of real estate receivables), in addition to certificates of agribusiness receivables and bills of exchange. agribusiness credit. 

With the application, on this category, of the rules set out in CVM Instruction No. 472, it is possible to acquire real rights over agricultural land which, when valued, will generate a return to investors, monetized by distributions. Therefore, we see that the vehicle acts as an instrument for democratizing investment in agribusiness and a gateway for small investors in agricultural land, which is usually expensive.

Finally, FIAGRO - participations, an investment fund for shares in companies, established under the terms of CVM Instruction 578, is aimed at investing in any companies that are part of the agro-industrial production chain, whether open or closed. In this case, the investor will be able to invest their resources in structured businesses, generally with a private equity nature, or even have access to investment vehicles in technology companies operating in the agribusiness sector, always seeking prospects for high gains through capital appreciation invested by the fund.

Despite being created in 2021, by November 26 of last year, there were already 31 FIAGRO registered, with issuance values ​​of R$7,5 billion. Of these, the highlight is the FIAGRO-Imobiliário modality which, with 24 funds, corresponds to the sum of R$6 billion in shares issued. Next, we have FIAGRO-Direitos Creditórios, with 7 registered funds.

Therefore, the market's adherence to the mechanism that combines greater investment opportunities with access to agribusiness by small investors is already clear, further enhancing the fastest growing economic sector in the Brazilian economy, at the same time as increasing dynamism and transparency for the rural land market and greater contribution to solving the already known problem of poor land allocation, combined with the legal security that the product offers, based on solid regulatory bases.

By José Alves Ribeiro Jr, partner at Vaz, Buranello, Shingaki and Oioli lawyers - VBSO; It is Barbara Breda, coordinator of courses at IBDA - Brazilian Institute of Agribusiness Law