Top Brazil hedge fund Verde sees domestic assets still falling

Guillermo Parra-Bernal and Paula Arend Laier – Reuters, 7/08/2015

Verde Asset Management, Brazil’s largest hedge fund, reinforced larger-than-benchmark bets on a weaker real, rising global equities and higher domestic borrowing costs, underscoring expectations that local asset prices will keep trending down in dollar terms.

In a monthly letter to investors on Wednesday, money managers led by Luis Stuhlberger said Verde is long-positioned in U.S. dollars and global equities by 40 percent and 20 percent, respectively, with no net allocation to local shares. The fund is also long positioned in Brazilian debt linked to inflation-adjusted interest rates.

Global investors are “overly optimistic” about Brazil’s outlook by assuming that domestic asset prices, as measured in U.S. dollars, are cheap and that a year-long decline in the Brazilian real is coming to an end.

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