White Papers and Reports

ETFs and the New Architecture of Portfolios: The New Era of Investments in Brazil

By Daniel Maeda, Head of the Legal and Regulatory Affairs, B3 S.A. – Brasil, Bolsa, Balcão

Since the launch of the first Brazilian ETF in 2004, the domestic market has followed a trajectory that reshaped how investors access capital markets. What started as a straightforward proposition, replicating the performance of a stock index through a single share, has, by 2025, become a robust, globalized and increasingly sophisticated ecosystem, serving both novice investors and large institutions.

This evolution is not merely about the number of products available; it reflects a structural shift in how ETFs are understood and used. In 2025, the market encompasses smart and themed structures spanning equities, fixed income, private credit indices, commodities and even crypto assets, alongside notable milestones such as the first hybrid ETF (combining fixed income and equity investments), the first ETF co-management model, the launch of ETF Connect (linking B3 with the Shanghai and Shenzhen stock exchanges through reciprocal listings), and the first Brazilian ETF based on Bitcoin futures contracts. These developments reinforce a broader message:

Diversification as an Enabler – Discipline as a Byproduct

ETFs stand out for turning diversification into a practical, repeatable decision. By packaging a defined portfolio and a transparent methodology into a single exchange-traded vehicle, they reduce the execution burden associated with assembling and maintaining diversified exposures, particularly relevant in markets where time, attention, and speed of decision-making are constrained.

Beyond operational efficiency, this structure tends to support a more consistent investor journey. With fewer components to manage and rebalance, the likelihood of impulsive responses to short-term volatility may decrease, reinforcing long-horizon behavior. As the market evolves, the discussion increasingly shifts from validating the ETF format to selecting exposures that best match portfolio objectives, an indication that ETFs are progressively treated as core building blocks rather than tactical novelties.

From Traditional Replication to Rules-Based Design: Smart Beta and Factor Exposures

The expansion of ETF strategies reflects the broadening of the local market toolkit. While conventional ETFs frequently track market-cap-weighted benchmarks, Smart Beta approaches apply systematic rules to reshape index composition with the goal of refining exposures and, potentially, improving risk-adjusted profiles.

These strategies typically rely on quantitative selection and weighting criteria aligned to widely studied factors, such as value, quality, size, and momentum, making approaches once concentrated in institutional mandates more broadly accessible through transparent index methodologies.

In Brazil, factor and alternative-index constructions are also positioned as a pragmatic answer to benchmark concentration. Methodologies that cap single-issuer weights, equalize allocations, or broaden representativeness aim to dilute concentration risk and enhance diversification, including through the inclusion of Brazilian companies listed abroad and other design choices that may reduce reliance on purely domestic market dynamics.

International Diversification with Lower Operational Complexity

International allocation has become a central component of modern portfolios, both to mitigate local risk and to access broader opportunity sets. In this context, ETFs can streamline global exposure by offering access to foreign indices through the local market, often without requiring investors to manage cross-border operational steps directly.

A relevant milestone in this direction is ETF Connect Brazil–China, launched in May 2025, enabling reciprocal ETF listings between B3 and the Shanghai/Shenzhen exchanges, positioning Brazil as the first market outside Asia to adopt this model.
Beyond the immediate product shelf expansion, initiatives of this kind can reinforce cross-border connectivity, encourage geographic diversification, and support the gradual integration of domestic capital markets into global investment flows.

Fixed Income and Private Credit: Liquidity, Governance, and Execution Efficiency

Brazil’s investment culture has historically favored fixed income instruments, and fixed-income ETFs have gained relevance by translating this preference into an exchange-traded format with liquidity, cost efficiency, and operational simplicity, features aligned with local investor behavior.

In agreement, the incorporation of private credit into the ETF wrapper represents a step toward “accessible sophistication.” Private credit ETFs aim to standardize access to a segment traditionally associated with lower liquidity and higher frictions. Eligibility rules, such as minimum issuance size, minimum secondary-market trading activity, and consistent market presence, seek to improve investability and support more resilient liquidity dynamics.

The arrival of institutional-grade use cases (e.g., private credit ETFs accepted as collateral) further indicates how ETF structures can expand from product innovation into market infrastructure, strengthening governance, operational efficiency, and integration with broader market processes.

Thematic Exposures as Strategic Building Blocks

As ETF menus broaden, thematic strategies have emerged as a scalable way to express long-term convictions. Instead of relying on single-stock selection, thematic ETFs typically provide diversified exposure to structural shifts, such as artificial intelligence, digital infrastructure, blockchain, robotics, and the energy transition, through a rules-based mandate and transparent portfolio construction.

For investors, these instruments can function as strategic allocations to multi-year theses, combining a clear investment rationale with the liquidity and accessibility of exchange-traded vehicles.

Alternatives and Risk Management: Gold and the Standardization of Crypto Exposure

ETFs also support diversification through exposures that may behave differently across market regimes. Gold, for instance, is commonly treated as a store of value and a portfolio hedge, with performance characteristics that may be beneficial in inflationary or uncertain environments and with historically lower correlation to many risk assets.

In the crypto segment, the ETF wrapper carries an additional dimension: standardization. By embedding crypto exposure into regulated, operationally robust structures, crypto ETFs can reduce friction related to custody, controls, and fragmented market infrastructure, making the exposure more naturally compatible with formal investment policies.
In Brazil, some structures obtain Bitcoin-linked performance through standardized derivatives traded on B3 with collateral held in highly liquid government bonds, aiming to combine economic alignment with operational resilience inside a regulated environment.

Overview: “Accessible Sophistication” as the Organizing Theme

The 2025 landscape suggests a shift from breadth of choice to depth of integration. Hybrid constructions, factor-based exposures, the expansion of fixed income and private credit ETFs, global thematic allocations, and regulated crypto solutions all point toward the same direction: integrating portfolio complexity “inside the vehicle” while keeping execution straightforward, transparent, and scalable for end investors.

In this sense, ETFs increasingly operate not only as a product category, but as a functional layer of modern portfolio construction, supporting diversification, systematic strategy design, and disciplined long-term allocation in an environment where clarity and efficiency are decisive.

Connect with the author

LinkedIn: Daniel Walter Maeda Bernardo | LinkedIn

Daniel Maeda is an engineer and a lawyer and has served as Head of the Legal and Regulatory Affairs area at B3 since 2025. Prior to that, he worked at the CVM Brazilian regulator for around 20 years in various positions, concluding his tenure as Director in 2024. In that role, he acted as a representative of the authority in several national forums (ENCCLA) and international forums (IOSCO and FSB).