Brazilian investors seeking protection against sudden changes in exchange rates on the back of the US dollar upward trend and the possibility of a rise in the country’s interest rates, have found in structured notes (Certificates of Structured Operations -COE) pegged to the dollar a flexible alternative to protect themselves.
According to the Central of Custody and Financial Settlement of Securities (Cetip), of the R$3.2bn worth of COEs registered up until mid-September foreign exchange COEs represented 35% of the issuance, followed by COEs pegged to inflation which accounted for 37% of the total issuance. The remaining products are linked to stocks, stock indices, both national and international, and also commodities.
“We have noticed that most COE operations linked to the exchange rate were purchased by investors worried about the fluctuation of the US dollar,” said Fabio Zenaro, executive manager of product and business development at Cetip who pointed to the advantages of COEs as a protection tool when compared with other structures. “[Investors] can purchase a COE with a specific strategy in relation to the size, maturity ranges and comfort oscillation rates. The flexibility of this instrument facilitates its use as protection according to the needs of the investor.”
According to Altamir Silva, director at Banco Safra, the variety of strategies used in COEs follows the market’s trends. “We are in line with the market and also have COEs pegged to inflation and shares,” he said. “The advantage is that COEs are simple and allow a safe investment with capital protection.”
Silva said that aside from the capital protection COEs allow for customised structures. "At Safra, we are very flexible and the structures we offer are different and we customise our products to meet the views of our customers,” he said.
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