Brazil Hedge-Fund Legend Increases Bet on Stocks Ahead of Vote
Fund took advantage of the Ibovespa’s 11% drop in dollar terms last month to “marginally” increase its position on Brazil stocks.
(Bloomberg) -- Brazilian legendary hedge-fund manager Luis Stuhlberger is taking advantage of election jitters to step up his bet on stocks.
The "Brazilian market continues on its frantic search to adjust to election odds on a daily basis," Stuhlberger’s Verde Asset Management SA said in a monthly note to clients. The fund took advantage of the Ibovespa’s 11 percent drop in dollar terms last month to "marginally" increase its position on Brazil stocks.
Investors have been punishing Brazilian assets amid a selloff in emerging markets and ahead of the election, pulling money from an exchange-traded fund at the fastest pace ever and the sending the currency near a record low.
With less than a month to go until the vote, market-friendly candidate Geraldo Alckmin remains stuck in fourth or fifth place, trailing more extreme names on the left and right. Former army captain Jair Bolsonaro leads voter surveys. Investors see him as a good option against the left, but his rejection level has soared. It’s also unclear what impact the attack on his life last week will have on the election.
"Asset prices indicate growing pessimism, partly because of Alckmin’s difficulty to grow, partly because of an important focus on Bolsonaro’s rejection," Verde said. "Volatility in prices has been bigger than volatility in polls so far."
Stuhlberger has become one of the most revered hedge fund managers in Brazil after his Verde fund posted a total return of some 15,000 percent buying back into equities since its inception 21 years ago, almost eight times the benchmark. In 2017, the fund underperformed for the third time in two decades. Stuhlberger had been sour on Brazil since 2014, when he exited domestic stocks completely amid political turmoil and a looming recession. In February, he said a string of positive surprises had prompted him to reconsider, and that his flagship Verde fund had been buying back into equities in the past few months.
Verde isn’t alone on its more optimistic view. Alaska Investimentos Ltda, owned by billionaire Luiz Alves Paes de Barros, has been long equities and long the Brazilian real, betting on rising commodities.
To contact the reporter on this story: Vinícius Andrade in São Paulo at vandrade3@bloomberg.net
To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, Julia Leite, Christiana Sciaudone
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