WisdomTree Brazil Real ETF Withdrawal Removes 90% of Fund

The WisdomTree Brazilian Real Fund (BZF), an exchange-traded fund tracking Brazil’s currency, lost more than 90 percent of its assets this week after redemptions of $473 million.

The fund, which had $513 million under management as of Jan. 24, lost the assets on Jan. 28 and 29, according to data compiled by Bloomberg and the latest fund data from New York-based WisdomTree Investments Inc., the ETF provider founded by former hedge-fund manager Michael Steinhardt. It’s the only U.S.-registered ETF that follows the real, which fell to a five-month low on Jan. 29.

Data posted on WisdomTree’s website show the fund received an inflow of more than $500 million on Oct. 10. Brazil’s currency has depreciated 9.6 percent since then, the second-most among major currencies tracked by Bloomberg.

A declining real prompted Brazil’s central bank to extend until June an intervention program that had been scheduled to wind down by the end of last year. While aiding exporters, a weaker real threatens to boost import costs and keep pressure on inflation.

“It looks like someone was maybe hedging their exposure against the real,” Dave Lutz, the head of ETF trading and strategy at Stifel Nicolaus & Co. in Baltimore, said by phone, referring to a trading strategy that involves opposing bets.

Intervention Program

Between Oct. 10 and Jan. 29, the fund lost 8.7 percent. WisdomTree manages $34.9 billion in 61 U.S.-registered ETFs, data compiled by Bloomberg show.

Brazil’s central bank in August announced a $60 billion intervention program of swaps and credit lines to buoy the currency and in December said it would extend the program. The country is trying to control inflation in the context of a weaker real, central bank President Alexandre Tombini said at a presentation in London on Jan. 27.

ETFs are pooled investment vehicles that issue shares to investors that trade on an exchange like a common stock. They invest chiefly in stocks, bonds, commodities and currencies and typically track an index.

To contact the reporters on this story: David Biller in Rio de Janeiro at dbiller1@bloomberg.net; Christopher Condon in Boston at ccondon4@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net

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