Lemann-Backed Stock Picker Thrives in Brazil’s Chaotic Markets
Lemann-Backed Stock Picker Thrives in Brazil’s Chaotic Markets
(Bloomberg) -- An asset manager backed by Stephen Mandel’s Lone Pine Capital LLC and billionaire Jorge Paulo Lemann is minting money in Brazil by successfully navigating one of the world’s worst stock markets -- and becoming a hit among investors.
Constellation Investimentos e Participacoes Ltda. is an equities-focused firm created more than two decades ago by Florian Bartunek, a 51-year-old stock picker who once helped manage Lemann’s personal fortune. Its flagship fund is bucking a slump in the local market, driven by investors’ concerns over the nation’s mounting fiscal woes while luring in new money at the fastest pace in its history, according to data compiled by Bloomberg.
“We obviously root for the country to do well, but in Brazil you have to find those firms with a good performance regardless of where the market goes,” Bartunek, who oversees about 15 billion reais ($2.7 billion), said in an interview. His Constellation Master FIA has topped about 94% of its local peers over the past five years, the data show.
Bartunek has leaned heavily on what he sees as local leaders to make his portfolio: firms that are not necessarily the cheapest, but managed to shield themselves from competitors through scale and knowing how to navigate Brazil’s maze of taxes and red tape. His current roster includes the country’s sole exchange operator B3, drugstore chain Raia Drogasil and car-rental firm Localiza. He also bets on newer companies that have been rapidly expanding, with exposure to Brazil but traded elsewhere -- such as e-commerce giant MercadoLibre, payments fintech StoneCo and retail broker XP Inc.
The Brazilian real has lost about a third of its value this year, the worst performing major currency in the world, making it increasingly hard for global investors to reap good returns in the nation’s stock market. In dollar terms, the benchmark Ibovespa gauge is down about 39% this year, trailing only Colombia for the post of worst major stock index in the world. Constellation’s main fund is up about 11% this year, compared with a drop of 14% for the Ibovespa in local currency terms.
“The currency is the biggest challenge a foreigner can face in Brazil,” Bartunek said. “A global investor may make a right bet on Brazil’s stocks only to see gains wiped out by the real.”
Even in U.S. dollar terms, the Constellation long-only fund stands out, with a 145% return over the past five years through Oct. 5 excluding all fees, compared to a 39% return in the Ibovespa in dollars in the same period.
As Brazilians increasingly shift to riskier investments amid record-low rates, Constellation’s shareholders have surged 30% to about 30,000 since the beginning of the year. About half of total assets under management comes from off-shore investors, down from 67% at the end of 2019.
Bartunek and Lemann co-created Constellation back in 2002, with 64 million reais under management. Bartunek had called Lemann a few years earlier asking for a job, after a stint working under Brazilian hedge-fund guru Andre Jakurski. He was hired to manage the personal equity investments of Lemann and his business partners, billionaires Marcel Telles and Carlos Alberto Sicupira, in 1998. Lemann still holds a minority stake in Constellation but no executive or board position. In 2007, Lone Pine Capital also became a minority shareholder.
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Constellation has recently started making private-equity investments in firms close to going public, which Bartunek says helps with analyzing publicly-traded companies and is something he’s planning on doing more going forward. One example is e-commerce software provider VTEX, which was valued at $1.7 billion in a recent funding round and also counts SoftBank as a backer.
Bartunek has been mostly keeping out of Brazil’s busiest year of initial public offerings in a decade amid skepticism about increasing competition in some sectors, particularly real estate. He’s also growing weary of apparel retailers. Even though Brazil’s recession will be smaller than previously forecast, a high unemployment rate may hinder the retail sector going forward, he said.
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