Brazil Hedge Funds

Brazil Hedge Funds

Hedge Funds in Brazil Invest in Bonds, Beat Out U.S. Funds

Hedge funds in Brazil have repeatedly beat out their American competitors by betting big on bonds. A story in Bloomberg highlights how Brazilian hedge funds, although largely similar to U.S. hedge funds, still managed to beat their competition by putting most of their money into stocks and bonds.  As a side, I go to Brazil every few months and I have observed first-hand this rapidly growing economy and its booming financial sector. 
The irony is that trading strategies by most Brazilian hedge funds are similar to those of indexed mutual funds. Brazilian managers put almost all of their money into bonds and stocks. Brazilian regulators call hedge funds multimercado, or multistrategy, firms to differentiate them from mutual funds.

Unlike the unregulated pools of capital in the U.S., hedge funds in Brazil report their asset values daily to regulators. They also have to disclose their holdings and typically must be able to meet redemptions within days of when investors ask for their money, inhibiting them from making many risky bets.

That means Brazilian hedge funds are relatively easy to manage, says Simon Nocera, co-founder of San Francisco-based hedge fund Lumen Advisors LLC and a former economist at the International Monetary Fund.

“All you have to do is buy the Bovespa stock index and government bonds,” he says. “It’s not like you have to be superactive or a great trader.”

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