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Interest Rates and Uncertainty Drive Capital Flows

Fixed Income Concentrates Demand, While Private Credit, Equities and Multi-Strategy Funds Remain Dependent on Geopolitics, Elections and the Fiscal Outlook to Gain Momentum

At Oliveira Trust, external uncertainties and Brazil’s fiscal challenges have called for greater rigor in credit assessments, amid a rise in issuances by lower-quality companies and the use of more complex collateral structures. At the same time, structured funds and specialized services continued to expand strongly, supported by the intensive use of technology.

Structured Funds – Developments in private credit have become more evident over the past 12 months. Buying pressure for receivables-backed securities, such as CRIs and CRAs, has increased, alongside a stronger volume of issuances by middle-market companies seeking to extend their debt maturities. However, the average credit quality of these issuers has declined. “This has required greater scrutiny and additional collateral, in some cases including unconventional guarantees, which are more complex and sophisticated structures that have come into use in the market,” says José Alexandre Freitas, CEO of Oliveira Trust.

In the real estate investment trust (REIT) segment, where Oliveira Trust holds a 5% market share, real estate companies have increasingly used unsold units as underlying assets. “These units are placed into the REIT to provide liquidity to the company itself, rather than to raise capital to finance new developments,” Freitas explains.

The executive sees risks both in maintaining high interest rates and in an excessively rapid reduction in the Selic rate in 2027. “Companies have not invested enough in inventory, and this could generate inflation. In that case, debt securities issued with inflation-linked returns could become a problem if the market heats up too quickly,” he says.

At Oliveira Trust, all new transactions are reviewed by a “proposal committee” comprising individuals and an artificial intelligence member. The institution receives more than 1,000 proposals from companies each year. A transaction is approved if it receives five votes in favor and rejected if it receives two votes against. The proportion of rejected proposals, which stood between 8% and 10% in the second half of 2025, rose to 15% in the first half of 2026, reflecting an increase in transactions considered poor-quality or involving disproportionate risk.

Freitas expects this environment to persist over the next 12 months. According to him, judicial restructuring cases have demonstrated the effectiveness of FIDCs’ protective mechanisms. “In many transactions, FIDCs continued operating despite the judicial restructuring proceedings or repaid investors in full. These funds have the ability to shield themselves from such situations,” he emphasizes.

Among the sectors requiring closer attention is construction. “In construction, it is necessary to consider the high costs faced by buyers and companies whose costs have been building up, which could be a source of problems. The automotive and agribusiness sectors are also likely to face somewhat greater difficulties over the next 12 months,” Freitas says.

Oliveira Trust also operates in a third area of the capital markets: specialized services, such as custody and syndicated transactions with banks. This business line delivered the company’s strongest performance over the past year, driven by the intensive use of technology. “We have 80 developers, but our most important investment has been in artificial intelligence tools and agents for information retrieval,” he explains.

With these tools, administrators have shifted their focus away from gathering data from credit bureaus and other sources and toward analyzing distressed situations. Before AI, a simultaneous surge in judicial restructuring filings would have required a proportional increase in staffing. Today, according to Freitas, the team could handle 30 hypothetical cases with the same resources previously required to manage just five.

Technology is also used to monitor multi-originator and multi-obligor FIDCs. “We want to be prepared for an increase in FIDC volumes, because a fund with more than R$2 billion in assets under management is already considered a high-volume fund,” he says. The share of credit card and payroll-deductible loan funds is also growing, while supply is increasing as interest rates decline and accelerate the transfer of loans to other financial institutions.

“Over the next 12 months, we will be in a much better position to make investment decisions than we were in September 2025, because the market already knows that interest rates will decline more gradually,” Freitas says. In his view, maintaining a close watch on the quality of issuing companies will remain essential. However, he sees a “convergence of favorable factors” and the prospect of a prosperous year, provided interest rates continue to decline gradually.