Home Hedge Funds Hedge Fund Verde Cuts Brazil Wagers After 3.8% Loss in April

Hedge Fund Verde Cuts Brazil Wagers After 3.8% Loss in April


(Bloomberg) — Verde Asset Management, the Brazilian hedge fund that made its name with hefty returns since launching in the late 1990s, pulled back bets on local stocks and falling rates after suffering the biggest monthly decline in years.

Verde’s flagship fund fell 3.8% after fees last month, its largest monthly decline since late 2021 and the worst April performance since 2003, according to data compiled by Bloomberg. That compares with a 0.9% gain for the CDI interbank benchmark rate, and a 1.5% decline for a basket of local hedge funds. 

The fund has implemented “substantial changes” to its portfolio after the administration of President Luiz Inacio Lula da Silva weakened the country’s fiscal target for 2025, Verde said in a note to investors. Those domestic fiscal uncertainties added to a global risk-off mood, taking their toll on Brazilian assets last month. As a result, the fund trimmed its exposure to the country’s stocks and practically scrapped wagers on falling local rates. 

“Any illusion that the government would pursue some discipline, however small, has fallen apart,” Verde said. 

Yields on Brazil inflation-linked bonds maturing in August of 2026 advanced 58 basis points in April, while swap-rate contracts maturing in January of 2025 jumped nearly 40 basis points.

The Verde fund has had a 24,000% return in local-currency terms since its inception, over which period the real has lost more than three-quarters of its value. Credit Suisse Group AG, which used to be a minority stakeholder in the firm, sold its stake last year to alternative asset manager Lumina Capital.

Verde Asset Management manages about 22 billion reais ($4.3 billion) and is run by industry veteran Luis Stuhlberger. 

–With assistance from Davison Santana and Felipe Saturnino.

©2024 Bloomberg L.P.

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