Brazilian Private Credit Returns Trail CDI Benchmark in 2024

The Brazilian private credit market continues to underperform the CDI benchmark following the instability seen in April of this year. Data from Nexa Finance reveals that the IDA-Liq DI index posted a cumulative return of 8.14% between January and September. During the same period, the CDI reference rate reached 9.24%.

The gap between the debenture index and the CDI peaked at 2.8% on April 10. Although bond prices saw a partial recovery in the following months, the deficit remained at 1% by the end of September. The long-term outlook shows a relative loss of 9.1% since January 2023.

Price recovery occurred without a clear improvement in the risk profiles of issuing companies. Central Bank data indicates that corporate default rates in free credit reached 4.33% in August. This is the highest level observed since 2018.

Capital flows into private credit funds also suffered significant impacts from the volatility. Between April and May, the sector recorded net outflows of R$ 31.3 billion. The cumulative negative balance between April and September totaled R$ 19.8 billion, contrasting with the previous period of strong inflows.

The annualized return of the private credit index fell 1.52 percentage points below the CDI during the analyzed period. The resumption of investments helped boost debenture prices, but it was not enough to close the accumulated gap. Investors who held positions in the sector faced lower real returns than the benchmark interest rate.