Alerts
- 5 September 2025
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Brazilian FIPs – New Rules Ahead: Five Headlines PE/VC Foreign Investors Should Track
Brazil is undergoing a significant transformation in its private equity and venture capital investment landscape. Recent regulatory reforms are modernizing the rules for investment funds, particularly those governing the widely used Fundo de Investimento em Participações (FIP) structure. These changes are designed to increase flexibility, broaden investor access, and align Brazil’s market practices with international standards. As the regulatory environment evolves, new opportunities and considerations are emerging for both local and international investors interested in Brazil’s growing private markets.
- Limited Liability: Investors’ liability is now limited to the amount of their subscribed capital, reducing legal risk and aligning Brazil with international standards;
- Unified Rulebook: All fund types are now governed by a single, comprehensive regulation, simplifying compliance and operations; and
- New Fund Types and Structures: The rule introduces new fund classes and allows for greater flexibility in structuring, including the possibility of open-ended, closed-ended, and hybrid funds, as well as multi-class/segregated portfolios and multi-strategy vehicles.
These changes have already made the Brazilian funds industry more attractive and accessible to both local and international investors, paving the way for further innovation, including for Private Equity and Venture Capital (PE/VC) funds. The most common vehicle for PE/VC investments in Brazil is the Fundo de Investimento em Participações (FIP)¹, also subject to the investment funds regulatory framework provided by CVM Resolution 175, but whose specific regulations are also about to undergo extensive modernization.
In continuation of the new regulatory framework established by CVM Resolution 175, the CVM provided additional guidance through Circular Letter 2/2025/CVM/SIN, specifically addressing innovative features and operational clarifications applicable to FIPs. Key advancements include allowing FIP quotas to be subscribed with assets instead of only cash, clarifying that portfolio compliance is the exclusive responsibility of the fund manager—not the fiduciary administrator—and permitting investments in simple loan agreements, even without equity rights, as long as governance and capital limits are met.
Proposed Changes to PE/VC Funds
CVM opened a comment period – Public Consultation SDM 03/24 – proposing a new set of rules on FIPs, which ended on March 2025. The proposed rules aim to modernize the FIP regulatory framework with features already in place across multiple jurisdictions. The new rules are expected to be enacted by end of 2025, and although they are still subject to further adjustments from the CVM, the following features are likely to reshape the FIP industry:
- Retail Access – A New Layer of Liquidity
The proposed regulations introduce a significant shift by allowing certain classes of FIPs to be offered to the retail investors, expanding access beyond the traditional base of professional² and qualified investors³. This democratization of private equity and venture capital investing is accompanied by robust investor protections. Retail-accessible FIPs will not be permitted to make capital calls, ensuring that investors’ financial commitments are fully known upfront. Offshore investments for these classes will be capped at 33% of net asset value, limiting exposure to foreign markets. Additionally, quotas of these funds must be listed on an exchange with mandatory market making, which is expected to enhance liquidity and provide transparent pricing. Investors’ liability will be strictly limited to their investment. Collectively, these measures are designed to broaden the investor base, deepen secondary market liquidity, and establish clearer valuation benchmarks, which could benefit both new retail entrants and existing professional-only vehicles.
- 100% Offshore Allocation for Professional Money
Under the new framework, FIP classes targeting qualified investors—including foreign institutions—will be permitted to allocate up to 100% of their net asset value to offshore investments. This marks a departure from the current regime, which imposes stricter limits on foreign exposure. Retail classes, by contrast, will remain subject to the 33% offshore cap. The reforms also allow FIPs to hold foreign securities directly or through feeder vehicles, eliminating the need for cumbersome dual-fund structures that have historically been used to facilitate global investment strategies. As a result, Brazilian PE/VC funds will be able to operate with the same international flexibility as their counterparts in more developed markets, making them more attractive to global investors and managers seeking to deploy capital across borders.
- “Effective Influence” Test Becomes Optional
A longstanding requirement in the Brazilian FIP regime has been that funds must exercise “effective influence” over their portfolio companies, typically through board representation or similar mechanisms. The proposed rules make this test optional, allowing fund managers and investee companies to negotiate the terms of influence on a case-by-case basis, with the agreed arrangements disclosed in the fund’s bylaws. This change brings the Brazilian regulatory framework into closer alignment with international practices, particularly in the venture capital and growth equity sectors, where minority investments without board seats are common. By removing this strict requirement, the new rules are expected to facilitate a broader range of investment structures and make it easier for funds to participate in deals where full control or board representation is not feasible or desirable.
- Conflicts & Related-Party Deals
The approach to conflicts of interest and related-party transactions will be differentiated based on the investor profile of each FIP class. For professional-only classes, the process is simplified: related-party transactions need only be disclosed in advance in the fund’s bylaws, reducing administrative burdens and transaction friction. Retail classes, however, will face a default prohibition on such transactions, which can be lifted either by approval from an independent conflict committee or by a vote of the investors. Notably, the requirement for investor assembly approval for pricing or the use of fund assets in related-party deals will be eliminated, further streamlining fund operations. These changes are intended to balance investor protection with operational efficiency, particularly for funds targeting sophisticated investors.
- Controlled Leverage Finally Allowed
The proposed rules will, for the first time, permit FIPs to use leverage, either by contracting debt or structuring transactions that expose the fund’s net asset value to capital risk. The extent of permissible leverage will be set as a percentage of committed capital and must be specified in the fund’s bylaws. This reform opens the door for Brazilian PE/VC funds to employ leveraged buyout (LBO) strategies and utilize NAV-based credit facilities, practices that are standard in other major jurisdictions but have been largely unavailable in Brazil. By enabling controlled use of leverage, the new rules are expected to enhance the competitiveness and strategic flexibility of Brazilian funds, allowing them to pursue a wider array of investment opportunities.
Final Remarks
The forthcoming changes to the FIP regime represent a pivotal step in aligning Brazil’s private markets with global best practices, offering greater flexibility, transparency, and access for all investor profiles. By modernizing the regulatory framework, the CVM is not only enhancing the competitiveness of Brazilian funds on the international stage but also fostering a more dynamic and inclusive investment environment at home. As these reforms move toward implementation, foreign investors should closely monitor the evolving landscape—both to capitalize on new opportunities and to ensure compliance with the updated rules. Ultimately, the anticipated regulatory overhaul promises to unlock new avenues for capital formation, innovation, and cross-border investment, positioning Brazil as an increasingly attractive destination for PE/VC activity.
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¹ As of July 2025, the FIP industry had an estimated net asset value of R$300 billion, spread across nearly 3,000 funds.
² Include financial institutions and other institutions authorized to operate by the Central Bank of Brazil; insurance companies and capitalization companies; open and closed supplementary pension funds; individuals or legal entities with financial investments exceeding R$ 10,000,000.00 (ten million reais), who also certify in writing their status as a professional investor; investment funds; investment clubs, provided their portfolio is managed by a securities portfolio manager authorized by the CVM; investment agents, securities portfolio managers, securities analysts, and securities advisors authorized by the CVM, in relation to their own investments; and non-resident investors.
³ Include professional investors; individuals or legal entities with financial investments exceeding R$ 1,000,000.00 (one million reais); individuals approved in a technical qualification exam or with certifications approved by the CVM, in relation to their own investments; and investment clubs, provided that their portfolio is managed by one or more shareholders who are qualified investors.
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