Credit Suisse Veterans Pile Into Reflation Wager in Hedge Fund

A new Brazilian hedge fund set up by veterans from Credit Suisse Group AG’s private-banking unit is betting big on commodity producers and rising rates as the global economy rebounds from the pandemic.

Sylvio Castro, the former chief investment officer at the Swiss bank’s Brazilian wealth business, helped create Grimper Capital -- named after the French equivalent of “to climb.” The Sao Paulo-based company has a 13-person team and an initial capacity to manage about 5 billion reais ($900 million), Castro said.

Credit Suisse Veterans Pile Into Reflation Wager in Hedge Fund

The view that fiscal stimulus and looser social-distancing restrictions should boost inflation has led the money manager to bet on an increase in global yields, especially 10-year Treasury rates. The firm also likes commodity-linked stocks amid a scenario of heated demand, favoring miner Vale SA and pulp maker Suzano SA in Brazil and sectoral indexes abroad.

“There are several drivers that should push inflation higher in the short term, from strong stimulus to people returning to streets,” Castro said in a video interview. “We may see a considerable pickup.”

The asset management firm is betting on rising inflation break-even rates, which is implied in inflation-linked bonds, in Brazil. It also sees specific opportunities across stock markets including Latin American e-commerce powerhouse MercadoLibre Inc., Brazilian retailer Magazine Luiza SA and cloud company Twilio Inc, one of the investor darlings in the pandemic.

In late February, Grimper Capital launched the multistrategy Grimper Blanc hedge fund, which invests in assets including equities, currencies, bonds and rates worldwide. The equity-focused Grimper Meru Long Bias hedge fund was launched earlier this month.

For the Blanc fund, Castro is staying mostly on the sidelines of his home-nation stock market, as the country grapples with a deteriorated virus scenario and increased political uncertainty.

Earlier this month, a decision to annul former President Luiz Inacio Lula da Silva’s convictions cast doubt on whether President Jair Bolsonaro would turn to more populist measures to boost approval ratings, potentially jeopardizing market-friendly reforms. That added to fears of political intervention at state-owned companies, bolstered by Bolsonaro’s move to oust the chief of Petroleo Brasileiro SA.

“The government doesn’t seem convinced that the pro-business agenda is a winner for the country in the medium- to long-term,” said Castro.

Castro started Grimper alongside Andre Szasz and Joao Paulo Freitas, after the trio departed Credit Suisse last year. They’re part of a larger trend of executives that left decades-long careers at major banks to set up their own asset-management shops. Local hedge funds saw about 103 billion reais in net inflows last year, the highest since at least 2006, according to Brazil’s capital markets association.

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