Rates Rout Fuels Worst Month for Brazil Hedge Funds Since 2020

tuf]o)i](lcu0273p1tpvkwp_media_dl_1.png BloombergArticle content(Bloomberg) — Brazilian hedge funds saw their worst month in six years in March as a surge in oil prices upended bets on lower interest rates globally, a popular trade among the country’s money managers. Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentA bulk of the losses came as swap rates in Brazil surged as traders slashed odds of rate cuts nearly in half amid the sudden jump in energy costs. Bets on lower crude prices also took a toll as Brent went from roughly $70 a barrel at the start of the war to more than $115 at the end of the month. Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article contentArticle contentA basket of local hedge funds tracked by the country’s capital markets association fell 3.4% in March — the worst returns since the pandemic hit in 2020. Among the biggest decliners were flagship funds at Ibiuna Investimentos and Kapitalo Investimentos, which saw losses of 10.9% and 6.5%, respectively, their worst month on record. By contrast, the CDI rate, the benchmark for the local hedge fund industry, rose 1.2% in March.Article contentTop StoriesGet the latest headlines, breaking news and columns.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article contentThe downturn put the brakes on what had been a strong start to the year as funds profited from bets of monetary easing. The slump came even as Brazil’s Treasury stepped in with a record intervention to stabilize the bond market last month, injecting liquidity as stop-losses were triggered. Article contentLosses at Ibiuna, which manages about 14 billion reais ($2.2 billion) in assets, were mainly tied to rates in emerging markets and the dollar, according to its monthly investor letter. Article contentKapitalo, meanwhile, suffered from bullish bets on equities, falling rates in both emerging and developed markets and lower crude prices. It reduced its risk exposure in the former positions and closed the latter, according to Bernardo Feijó, partner and chief operating officer.Article contentArticle content“Everyone was caught off guard, across the board,” said Feijó. Kapitalo is keeping smaller bets in both emerging and developed market rates, and relative value positions in Brazilian equities, he said, adding that the process of resuming risk allocation may be more gradual than usual. “The market has been badly bruised.” Article contentHere’s a roundup of what some of Brazil’s largest hedge funds did in March, based on interviews and letters to clients: Article contentLegacy Capital saw losses mainly due to positions in local swap rates and overseas equities, according to its monthly letter “Relevant” uncertainty in the outlook led the firm to slash its risk exposureOccam, which manages almost 15 billion reais, trimmed bets on lower rates in Brazil, saying the easing cycle might be affected The asset manager is raising holdings of local banks and US technology stocks, it said in a letter to clients.At Absolute Investimentos, which manages nearly 70 billion reais, losses were contained as the firm had a relatively small bet on lower interest rates, partially buffeted by bets of higher rates, it said in a letter to clientsLuis Stuhlberger’s Verde Asset Management gained with increased bets in Brazilian equities, hedges using oil options and a newly implemented position in silver; losses were led by global equities, gold, currencies and local credit, it said in its monthly letterAdam Capital said in its March note that it has positions that benefit from a rise in local rates and inflation; is betting in US technology stocks and the US dollar against the real and the euroVinland Capital drastically cut risk in its portfolio amid the war, reducing positions that benefited from falling rates in Brazil and a weakening dollarBahia Asset said in its monthly note it gained from relative positions in equities, including indexes in Brazil and the US; it lost on bets on rates in emerging countries and gold The fund has bets on Brazilian stocks and the real against a basket of currencies, is shorting the euro and dollar against DM currencies and is long goldGenoa Capital said losses came from its exposure in global currencies and rates, as well as local rates and equities. It’s bet on the Brazilian real contributed positively, it said in a response to questionsAce Capital’s losses came mainly from its fixed income strategy and global equities, especially due to the sell-off in the S&P 500, it said in its monthly letterArticle contentTrending Doritos at US$7 a bag ended up costing PepsiCo billions Retail & Marketing BYD to open 20 car dealerships in Canada this year Autos Posthaste: How the U.S. dollar stole the Canadian dollar's petrocurrency thunder News Subscriber only. Saudi Arabia’s vital East-West oil pipeline attacked after ceasefire Subscriber only Financial Times A 1,300% rally turns a tiny shipping ETF into an Iran war gauge PMN Business Share this article in your social networkCommentsYou must be logged in to join the discussion or read more comments.Create an AccountSign in Join the Conversation Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information. Doritos at US$7 a bag ended up costing PepsiCo billions Retail & Marketing BYD to open 20 car dealerships in Canada this year Autos Posthaste: How the U.S. dollar stole the Canadian dollar's petrocurrency thunder News Subscriber only. Saudi Arabia’s vital East-West oil pipeline attacked after ceasefire Subscriber only Financial Times A 1,300% rally turns a tiny shipping ETF into an Iran war gauge PMN Business