Summary

• Global financial infrastructure offers a strategic 'picks and shovels' approach to international investing.
• Key platforms like BlackRock and CME Group benefit from rising global trading and investment volumes.
• This strategy helps reduce individual stock risk and diversifies away from the Brazilian domestic market.
• Capitalise on the long-term trend of globalised investing and increasing cross-border capital flows.

Forget Stock Picking, Buy the Casino Instead

Let’s be honest, shall we? The idea of unearthing the next global tech giant from your desk in São Paulo sounds terribly exciting. It’s the stuff of investor folklore. The reality, however, is often a messy business of navigating unfamiliar markets, baffling regulations, and trying to pick a winner from a line-up of thousands. It’s a bit like trying to find a specific needle in a haystack, when the haystack is on the other side of the world. I think there might be a craftier way to play the game.

The Allure of Selling Shovels

During the great gold rushes of the 19th century, who made the most reliable money? It wasn’t the poor souls panning for gold in freezing rivers. It was the shrewd characters selling them the picks, shovels, and overpriced jeans. The principle holds true today. Instead of betting on a single company to strike it rich, why not invest in the infrastructure that the entire global market relies on? To me, it seems a far more sensible proposition. You’re not betting on a single horse, you’re owning a piece of the racetrack. Every transaction, every trade, every new fund launched puts a little something in your pocket. It’s a strategy that profits from the sheer activity of global investing, not the chaotic outcome.

The Titans of the Ticker Tape

So, who are these modern-day shovel sellers? You know their names, even if you haven’t thought of them this way. Take BlackRock, the world’s largest asset manager. They are the undisputed landlord of passive investing. As millions of investors worldwide pour money into ETFs, BlackRock’s tollbooths are there to collect the fees. They don’t need to care if German industrials outperform American tech, they profit from the flow of capital itself.

Then you have the likes of CME Group, which runs the world’s biggest derivatives marketplace. They provide the essential tools for managing risk. Every time a global fund wants to hedge against currency swings, CME is there. And there’s Intercontinental Exchange, or ICE, which owns the New York Stock Exchange among others. They are quite literally the house, providing the venue and the data that powers modern finance. These aren’t speculative ventures, they are the bedrock of the system.

A Sensible Escape from Home Bias

For a Brazilian investor, this approach has a particular elegance. It sidesteps the headaches that come with direct international stock picking. You gain exposure to global growth, but through established, dollar-denominated giants. This helps insulate you from the whims of local economic cycles and the rollercoaster of currency fluctuations. These companies are global behemoths, earning revenue in dozens of currencies, which provides a natural buffer. It’s a way to diversify away from domestic concentration risk by investing in the very companies that facilitate global diversification for everyone else. There’s a certain beautiful logic to it, don’t you think?

Of course, no investment is without its risks. These companies are not immune to market downturns. If global trading volumes fall off a cliff, their revenues will feel the pinch. And they operate in a world of intense regulatory scrutiny, where a politician’s pen stroke could change the rules of the game. But these are broad, systemic risks, not the idiosyncratic danger of a single small company going bust. For those looking for a more targeted approach to international markets, exploring a curated portfolio like the Global Small-Cap Growth: What's Next for Brazil? basket might offer a different kind of exposure. But for a foundational, long-term play on the relentless globalisation of finance, owning the infrastructure is a compelling thought.

Deep Dive

Market & Opportunity

• Investing in financial infrastructure companies offers a 'picks and shovels' strategy for exposure to global markets.
• These companies benefit from the growth of global investing through increased trading volumes, higher asset management fees, and demand for services.
• The approach provides exposure to global growth without the concentrated risk of selecting individual international stocks.
• It offers diversification for portfolios heavily weighted towards domestic assets, as these companies are not correlated with Brazilian economic cycles.
• The companies tend to generate steady cash flows from transaction fees, management charges, and data subscriptions.

Key Companies

• BlackRock, Inc. (BLK): The world's largest asset manager, providing passive investing infrastructure through its iShares ETF platform which facilitates billions in daily cross-border capital flows.
• CME Group Inc. (CME): Operates the world's leading derivatives marketplace, providing essential risk management and currency hedging tools for international investors.
• Intercontinental Exchange, Inc. (ICE): Operates major stock exchanges and provides essential market data services that support algorithmic trading and AI-driven investment strategies.

Primary Risk Factors

• Company revenues are sensitive to overall market activity and can decline during periods of reduced trading or market stress.
• As heavily regulated entities, these companies face risks from policy shifts that can impact their business models.
• Currency exposure, particularly the strength of the US dollar relative to the Brazilian real, can affect returns for Brazilian investors.

Growth Catalysts

• The ongoing globalisation of investing and falling barriers to international capital flows increase the value of the platforms that facilitate these activities.
• The technological evolution of finance, including AI and data analytics, creates growth opportunities for established infrastructure providers.
• A secular trend of emerging market investors seeking global exposure for long-term wealth building drives demand for their services.
• Increasing harmonisation of international financial standards makes cross-border investing more accessible, benefiting providers that operate across multiple jurisdictions.