Hedge Fund Defies Brazil’s Stock Bulls as Global Economy Slows

(Bloomberg) -- One of Brazil’s largest independent hedge-fund managers is skeptical about the local euphoria surrounding the nation’s stock market.

“While Brazil is in early cycle, we don’t consider it will be able to untangle from the global outlook and we keep a neutral view on the local equities,” according to a monthly note to clients from Adam Capital, which manages about 26.4 billion reais ($6.3 billion).

The Rio-based asset manager, which was founded by Andre Salgado and Marcio Appel in 2016, said the fiercer trade war has already brought “irreversible damages” to the global production chain. “After years of integration, this process’ reversal will spark uncertainties and costs to companies and consumers across the world over the next years,” according to the fund.

Besides the trade-related tensions, Adam Capital believes that other events -- including the conclusion of Brexit, the confidence crisis in Hong Kong’s political system and Italy’s fiscal and political instability -- could heighten risks.

Brazil’s benchmark Ibovespa equity index has gained 14% this year through Monday, as President Jair Bolsonaro’s administration tries to move forward with initiatives to shore up Latin America’s largest economy. While a relatively robust social security reform was already approved by the country’s lower house and now awaits for a vote in the Senate, growth is still at a disappointing pace.

Adam Capital’s Adam Macro II FIC FI Multimercado fund posted total return of 1.87% in August, beating 96% of its peers, according to data compiled by Bloomberg. That compares with a 0.7% drop for the Ibovespa and 0.50% for the interbank rate known as DI, the fund’s benchmark.

To contact the reporter on this story: Vinícius Andrade in São Paulo at vandrade3@bloomberg.net

To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Ney Hayashi, Danielle Chaves

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