Nubank launches LVOL11 and HIGH11, two new ETFs based on Ibovespa B3 Smart Beta indexes

São Paulo, July 15, 2024 – In another step towards contributing to the development of the ETF market in Brazil, Nu Asset Management (Nubank’s investment fund manager) announces two new solutions: the Nu Ibov Smart Low Volatility B3 (LVOL11) and the Nu Ibov Smart High Beta B3 (HIGH11). The two ETFs will start trading on Tuesday (July 16) on B3, the Brazilian Stock Exchange, and follow indexes developed jointly by the two institutions.

These two new funds will allow investment in low-volatility stocks (LVOL11) or in securities that enhance returns during market upswings, albeit with higher historical risk (HIGH11). The launches represent another step aligned with Nu Asset’s purpose of meeting different objectives and needs in investors’ portfolio diversification strategies.

“When we decided to enter the ETF market, we saw this category of investment products as a way to innovate in the Brazilian market and spread knowledge about this type of fund. LVOL11 and HIGH11 follow our purpose of offering solutions focused on investors, suitable for various profiles and needs, complementing the process we started with the creation of Brazil’s first dividend-paying ETF, NDIV11,” says Andrés Kikuchi, Nu Asset Management Executive Director.

Nubank’s two new ETFs require a minimum initial investment of R$100.00, a management fee of 0.5% per year, and two-business-day liquidity (D+2) in the case of redemption. Both are available to institutional and individual investors, subject to profile suitability at the broker with which they are affiliated.

Smart Beta Indexes

Since 2023, Nubank has partnered with B3, the Brazilian stock exchange, to launch solutions through the joint creation of Smart Beta indexes based on the Ibovespa B3 index, the most traditional and recognized in the market, which has existed since 1968.

Following the development of the Ibovespa Smart Dividendos, this partnership resulted in the new Ibov Smart Low Volatility B3 and Ibov Smart High Beta B3 indexes, which reference the LVOL11 and HIGH11 ETFs, respectively.

“We have identified a growing market demand for more detailed analysis of specific parts of the Ibovespa B3 portfolio, the main indicator of the Brazilian market. With our Index strategy, we can quickly and efficiently develop and deliver new indicators to enable the launch of new products that present real investment opportunities, including for individual investors,” says Henio Scheidt, B3 Index manager.

“ETFs have the attributes of simplicity, efficiency, and transparency, as does everything we do at Nubank. Together with B3, we began to think of ways to refine the Ibovespa B3 using the Smart Beta indexes concept to further enhance these attributes and meet the real needs of investors, from the most conservative to the most aggressive,” observes Kikuchi.

Methodology: efficiency of new indexes

The indexes developed by the Nu Asset and B3 partnership follow unique methodologies to provide allocation tools to the Brazilian financial market. The Ibov Smart Low Volatility B3, which the LVOL11 ETF references, was developed to reflect a portfolio that includes one-third of the Ibovespa B3 index’s lowest volatility stocks. A risk calculation approach (EWMA – Exponentially Weighted Moving Average), widely applied in the financial market over decades to smooth market fluctuations, was used.

Had it existed since 2003, the new index would have reduced volatility by an average of 20% compared to Ibovespa B3, increasing cumulative returns by more than 850%, according to a retroactive survey by B3 and Nu Asset, based on the application of the new index. 

Meanwhile, the Ibov Smart High Beta B3 composes the HIGH11 ETF. The portfolio selection includes one-third of the B3 Ibovespa stocks with the highest Beta, indicating asset sensitivity. The average Beta over one year is calculated for the selected securities, compared to Ibovespa B3’s return over three years. Beta in the stock market reveals a variation of assets concerning the market variation – those with the highest calculation results are precisely those that can rise or fall more relative to the index average.

In tests conducted by B3 and Nu Asset teams, applying the index methodology since 2006, the Beta achieved by Ibov Smart High Beta B3 was 1.2 times that of Ibovespa B3, meaning 20% superior oscillation. In periods of positive market oscillation, the new index was 1.4 times higher than B3 Ibovespa.

These two new B3 Smart Beta indexes follow Ibovespa B3’s quarterly rebalancing calendar, with composition adjusted according to the methodology’s criteria. The portfolio can be accessed on B3’s website.

Nu Asset: innovation and diversity of offerings for investors

The LVOL11 and HIGH11 ETFs join two innovative solutions in the Brazilian market focused on dividend-paying companies, which were announced in September last year: NDIV11, which distributes dividends to shareholders monthly, and NSDV11, which reinvests dividends back into the fund. Together, NDIV11 and NSDV11 already have over 17.7 thousand shareholders and more than R$77.3 million in assets under management.

In fixed income, Nubank’s fund manager offers alternatives such as the Nu Reserva family (Planejada and Imediata). More recently, Nu Asset launched Nu Selic Simples and Nu Infra (NUIF11), listed on B3 and primarily allocated in incentivized private credit securities related to infrastructure investments.In its portfolio, Nu Asset also manages the multimarket funds of the Nu Seleção family (Cautela, Equilíbrio, and Potencial) and the Nu Ultravioleta funds (Equity and Multimarket).