Hedge Fund Legends Are Snubbing Brazil’s Real

(Bloomberg) — Pension reform optimism and a narrow current account deficit are still not enough to get some of Brazil’s top fund managers to bet on the nation’s currency.

Given economic fundamentals, the real could be trading at about 3.30 per dollar, said Luis Stuhlberger, a Sao Paulo-based founding partner at Verde Asset Management, which oversees 40 billion reais ($10.5 billion). Yet, record low interest rates are “evidently” having an impact, he said.

“The current 3.80 per dollar level seems a fair price for the currency given the global conditions,” Stuhlberger said at an event in Sao Paulo on Saturday.

Stuhlberger’s not alone in making that call. SPX Capital’s founding partner Rogerio Xavier told the same event that the currency is near its “equilibrium price.” SPX, the biggest independent hedge-fund manager in Brazil, even sees the risk of the real depreciating if a global slowdown hurts Brazil’s terms of trade.

The real is up 2% since the beginning of the year, trading at 3.8045 on Monday, on optimism the social security bill will be approved by Congress this year and on recent dovish signals from the Federal Reserve.

“The uncertainty over aneconomic rebound and other reforms’ implementation, a lower carry and the still-robust performance of the American economy turn the real less attractive in relative terms,” said Mariana Guarino, a portfolio manager at Rio-based hedge fund Truxt Investimentos.

©2019 Bloomberg L.P.


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