| SAO PAULO, July 11
SAO PAULO, July 11 Money managers at Credit
Suisse Group AG's CSHG Verde FIC FIM, the biggest Brazilian
hedge fund, are betting the nation's central bank will soon
begin to cut interest rates to revive a flagging economy.
Verde stands by its bet that Brazil's currency, the real,
will fall despite central bank efforts to prop it up, as
concerns grow over the sustainability of public finances and
external accounts, the managers said in a letter to investors
distributed on Friday.
The real's "artificial stability," coupled with declining
global market turmoil, allowed Verde to "set positions that
could eventually benefit from a central bank's interest-rate
cut" in future monetary policy meetings, the letter added.
The real is up 6.1 percent against the U.S. dollar this
The central bank raised the benchmark Selic overnight
lending rate nine times between April 2013 and April this year,
leaving them unaltered ever since to head off inflation.
While most analysts expect rates to stay at current levels
next year to help bolster growth in an economy that has been in
a rut for almost four years, others see signs of a potential
easing in policy.
As the Brazilian economy "stagnates, there is the
possibility that the central bank reckons that it tightened
policy too much - opening the room for a partial reversal of the
recent rate hikes," the letter added.
Most analysts expect the economy to expand about 1 percent
Fundo Verde shed 0.06 percent in June, the fifth decline in
six months, following a 0.91 percent gain in May, the letter
said. The fund yielded a negative 2.06 percent return this year,
its worst year-to-date return since its inception in 1997. In
comparison, Brazil's benchmark CDI interbank interest rate
returned 4.97 percent during the same period.
In April, Credit Suisse and star fund manager Luis
Stuhlberger, who created Verde, agreed to set up a new asset
management venture with $14 billion under his control.
The venture, to be named Verde Asset Management, will open
in January, with Credit Suisse and some of Stuhlberger's
associates as minority partners.
The deal allows Credit Suisse to retain Stuhlberger,
Brazil's most successful fund manager, whose CSHG Verde FIC FIM
hedge fund has posted total return of about 8,500 percent since
(Reporting by Guillermo Parra-Bernal. Editing by Andre Grenon)