| SAO PAULO, March 10
SAO PAULO, March 10 Money managers at Credit
Suisse Group's CSHG Verde FIC FIM, the largest
Brazilian hedge fund, said on Monday they were sticking with
their bet on a decline in Brazil's currency, as concerns grow
over the sustainability of public finances in Latin America's
Fundo Verde shed 1.25 percent in February, on top of a 0.06
percent in January, which were its first back-to-back monthly
declines since mid-2011, according to a letter to investors. The
year-to-date 1.31 percent loss at Verde compares with a return
of 1.63 percent in Brazil's benchmark CDI interbank interest
rate, the letter said.
February's loss stemmed from the fund's exposure to the
Brazilian currency, the real, and to fixed-income
investments, the letter said. Verde, led by renowned Brazilian
money manager Luis Stuhlberger, oversees more than 20 billion
reais ($8.5 billion) in assets.
In the letter, Stuhlberger and his team said the real's 2.9
percent gain in February followed a central bank strategy to
ease demand for foreign currency and raise borrowing costs to
head off inflation, making returns in the country more
attractive than in other emerging market economies.
The situation, however, may not prevail for long as
investment and portfolio inflows into Brazil lose steam, the
So far this month, the real is down 0.1 percent.
"This juggling act between fundamentals and market timing is
a classical dilemma in asset management, and I already went
through this thing many times in my long career," Stuhlberger
said. "We continue to believe in the thesis of a devaluation of
The biggest argument behind Verde's bet against the real
lies in its questioning of the sustainability of Brazil's public
finances, the letter said. In the short run, however, concern
about the issue eased following a pledge by President Dilma
Rousseff's administration to slash 44 billion reais in spending
and deliver a primary budget surplus equivalent to 1.9 percent
of gross domestic product.
Rousseff's budget spending practices are undergoing close
scrutiny from investors after she promised to rein in public
spending to avoid a downgrade by credit ratings agency Standard
& Poor's. The primary surplus is a measure of the government's
ability to generate cash that will be used to pay down debt.
Shrinking primary surpluses have widened Brazil's overall
budget shortfall, which includes all expenses including
debt-servicing, to a three-year high of 3.28 percent of GDP. In
2012, the deficit was 2.48 percent of GDP.
Stuhlberger is the chief investment officer of Credit Suisse
Hedging Griffo, the Swiss bank's asset management division in