Hedge Fund SPX Scraps Bet Against Emerging-Market Currencies

(Bloomberg) -- One of Brazil’s largest hedge fund managers is ditching a year-long bet against developing-nation currencies as global liquidity fuels appetite for risk.

SPX Capital, which manages about 40 billion reais ($8 billion), scrapped a short position in emerging-market currencies in May, according to a monthly letter to clients. The firm entered the trade between March and April 2019 and doubled down on the wager later last year.

“Even as the global economy entered a deep recession due to the Covid-19 shock, with strong GDP contractions in the first half of the year, the focus is now on the recovery, which is already under way,” SPX said. The firm also mentioned expectations that central banks and authorities will “unconditionally” support the rebound.

Emerging-market currencies strengthened 1.9% this month according to a MSCI Inc.’s index, on newfound optimism over global economic growth as more nations roll back lockdowns. The gauge is still down 3.9% this year, led by a 19% slump in the Brazilian real, and was headed for its biggest drop since early May on Thursday.

SPX said that while there have been positive developments in Brazil, including signals that Economy Minister Paulo Guedes will remain in his post, risks remain amid a deepening recession. The asset manager doesn’t have any relevant net exposure to Brazilian stocks and rates at this moment, according to the letter.

Last month, the firm’s SPX Nimitz fund fell 1.0%, while the benchmark rose 0.2%. The fund is still beating the benchmark by 72 basis points year to date, according to data compiled by Bloomberg.

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