What are equity investment funds (FIP)?
Find out what equity investment funds are and how this type of investment works
Announcements
Equity investment funds, also known as Private Equity, are not very well-known applications on the market.
After all, they are intended exclusively for qualified investors! Although the earning possibilities are high, there are more risks involved. In fact, this is one of the reasons why FIP is a more restricted type of investment.
And if you want to know more about how this financial asset works, keep reading. We will explain everything about it.
What are equity investment funds (FIP)?
FIP is a type of variable income investment constituted in the form of a closed condominium.
Shares can only be redeemed at the end of their term.
Basically, the objective is to invest in companies with great growth potential, but which are not yet listed on the stock exchange.
These resources are intended for the acquisition of shares, debentures, bonds and convertible securities, among others.
In the investment world, they can also be called Private Equity.
What are the types of equity investment funds?
According to B3 (the Brazilian stock exchange), FIPs are categorized into four types:
FIP- Seed capital
It is a fund restricted to shares in companies or limited partnerships with annual gross revenue of a maximum of R$16 million.
It is aimed at startups that are still in the initial phase, but have already managed to obtain monthly revenue.
To do this, the financial years of the last three years prior to the initial contribution must be evaluated.
Therefore, for the fund to be classified in this category, the company in question cannot present revenue above this limit in the last financial years.
FIP – Emerging companies
An emerging company is one that is still growing in the market, but already has good growth potential, when compared to a newly founded company.
This fund is intended for companies that have gross revenue of up to R$1,400 million.
To comply with this criterion, the latest financial years of the chosen company are also checked.
FIP – Infrastructure
FIP-IE and FIP-PD&I type funds invest in publicly or privately held companies in the infrastructure sector.
The shareholders' capital is generally invested in companies that aim to develop research and innovation in areas such as sanitation, irrigation, transportation, among others.
FIP – Multi-strategy
These FIPS allow investment across multiple categories.
In fact, in this type of fund, there is the possibility of investing up to 100% of the subscribed capital (amount that a shareholder undertakes to pay to form the company's share capital in a defined period), in assets abroad.
Therefore, the FIPS in this category may vary according to the objectives of the shareholders.
Are Equity Investment Funds (FIP) only available to qualified investors?
To invest in FIPS you must be a qualified investor, that is, have assets of more than R$ 1 million invested or be a professional with one of the valid certifications of CVM.
This means that this type of fund is not available to the common investor.
According to the Securities and Exchange Commission's instruction 539, this classification was created with the objective to protect the common investor from risks disproportionate to their financial capacity, which may result in significant losses.
After all, FIPs are investments that, despite offering good earning potential, also present certain risks.
In addition to FIPs, there are other types of investments restricted to qualified or professional investors.
What are the advantages of equity investment funds?
FIPs, as you already know, carry a high risk.
However, they offer several advantages to their investors.
Among the benefits, we can mention:
Good return potential
This is one of the main reasons why qualified investors are interested in FIPs.
Since most of the companies that FIP invests in are in the development phase or implementing new projects, there are chances of high returns in the long term.
In other words, some businesses offer great growth potential.
Portfolio diversification
Diversification is essential in the world of investments.
By creating a diversification strategy, you increase opportunities and reduce risks.
The reason for this is that the results are no longer tied to a single investment.
Therefore, diversifying your portfolio is an essential strategy for anyone who wants to dilute the risks involved.
Corporate governance
One of the objectives of those who invest in FIP is to create financial value for the company.
However, there is also an influence on management with corporate governance practices.
Furthermore, investing through this type of fund introduces the role of a manager, which provides greater security for investors.
Disadvantages of FIPs
Despite the possibility of diversifying your portfolio and obtaining good returns, there are some disadvantages to this type of investment.
Risk is one of the disadvantages of FIPS.
When investing in startups, you need to take into account the risk that the company will not succeed.
Furthermore, as it is a long-term investment, there is low liquidity (ability to convert an asset into cash). It is not possible to redeem the invested amount early, unless provided for in the regulations.
How to choose a private equity investment fund (FIP)?
To choose a FIP, you need to evaluate your investor profile.
This type of investment is recommended for those who have a bold profile, that is, they have greater tolerance to market fluctuations and risks.
Management is also another essential point when choosing a FIP. Therefore, be sure to consider the quality of the managers and the criteria they follow.
Conclusion
Equity investment funds (FIPs) are intended for qualified investors.
This type of investment offers the possibility of obtaining good financial returns and diversifying the portfolio. However, there are risks involved, which must be considered.
To implement an investment strategy, evaluate the market characteristics, your profile and your needs!
