SAO PAULO, Jan 11 (Reuters) - Verde Asset Management, Brazil’s largest hedge fund, stepped up bets against the euro as well as the Brazilian and Chinese currencies on expectations that U.S. interest rate hikes and slumping oil prices would continue to weigh on financial assets.
In a monthly letter to investors on Monday, money managers led by Luis Stuhlberger said Verde had started becoming net-short positioned in the euro, the Brazilian real and the Chinese renminbi and had slightly scaled back its holdings of global equities.
Last year, the Verde FIC FIM fund booked a consolidated return of 28.67 percent, the strongest performance in nine years, the letter said. That compared with the 13.23 percent posted by Brazil’s benchmark CDI interbank interest rate .
In a short sale, investors borrow a security and sell it, betting the price will fall before they have to buy back the security to restore it to the lender. Throughout the year, Verde’s short positions in some currencies propelled its annual returns, with holdings of equities partially paring back gains.
Likewise, the plunge in Brazilian shares is allowing Verde to slowly add top-flight stocks at attractive prices, the letter said. A series of recent events in Brazil, such as the replacement of the country’s finance minister and efforts to avert the impeachment of President Dilma Rousseff, “will have an impact throughout 2016,” the letter said.
Stuhlberger’s view underscores the challenges facing Brazil and other emerging market countries as the U.S. Federal Reserve tightens monetary policy.
In December, Verde gained 1.04 percent. The fund’s currency book returned 0.4 percent, while its fixed-income and equities books posted losses of 0.09 percent and 0.31 percent, respectively.
São Paulo-based Verde oversees about 37 billion reais ($9.2 billion) in clients’ money.
$1 = 4.0135 Brazilian reais Reporting by Guillermo Parra-Bernal; Editing by Paul Simao
Our Standards: The Thomson Reuters Trust Principles.