Brazilian Hedge Funds Return

Brazilian Hedge Funds Make Up for Losses in 2008

Hedge funds in Brazil have bounced back in a big way after record redemptions in 2008. Hedge funds have drawn more capital than any other investment pool in Brazil. Last year, investors withdrew 54.6 billion reais from hedge funds but Brazilian hedge funds have raised a net 33.7 billion reais (about $19.7 billion) this year through Oct. 15.

Local hedge funds had a great third quarter this year, raising 36.3 billion reais. Another sign of a strong recovery is that the Bloomberg Active Index of Brazilian hedge funds (tracking the performance of more than 1,000 hedge funds) has risen by 44% this year through October 12.

A Brazilian equities rally and record low interest rates are also spurring demand for higher-yielding assets. The Bovespa stock index rose 1.6 percent today to 67,239.45, extending a gain this year to 79 percent.

Brazil’s 326 billion-real hedge fund industry received more money than any fund group in Brazil so far this year, according to Anbid. Funds that invest in asset-backed securities came second with a net inflow of 13 billion reais, followed by fixed- income funds, which recorded 9.8 billion reais in inflows through Oct. 15, Anbid data show.

The Bloomberg index of Brazilian hedge funds, known locally as multimercados, fell 15 percent last year, less than half the 41 percent drop of the Bovespa index. The average global hedge fund’s holdings, as measured by the HFRX Global Index, rose 12 percent this year through Oct. 15. The gauge is still 17 percent below a record set July 13, 2007. Source

Read our 1 Page Guide to Brazilian hedge funds with more than a dozen unique resources as well as first-hand commentary from my visits to Brazil.

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