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Hedge Fund Industry Booms in Brazil as Investors Take More Risk

  • Net inflows topped $30 billion in 2017 as interest rates fell
  • This year’s prospects seen as positive, depending on election

The hedge fund industry in Brazil had its best year ever in 2017, with falling interest rates and investor confidence spurring expectations the trend will continue.

Brazilian “multi-market funds,” similar to global hedge funds, posted net inflows of 97 billion reais ($30 billion) last year -- almost five times the 2016 total and the most for any type of fund, according to Anbima, Brazil’s capital-markets association. The entire fund industry’s inflows more than doubled to a record 263.8 billion reais as investors shifted from bonds in search of higher yields, Anbima data show.

Best Year Ever

Net inflows/outflows for hedge funds in Brazil, known as "multi-market" funds

Source: Anbima

“Investors are more confident about prospects for Brazil’s economy and have more appetite to go beyond fixed-income investments,” said Antonio Quintella, chief executive officer at Canvas Capital SA, a Brazilian alternative asset-management firm backed by Credit Suisse Group AG. This year, fund managers may take advantage of increasing volatility that’s common in election years, Quintella said, referring to October’s presidential election.

The three biggest hedge funds in Brazil as of Jan. 24 were Safra Galileo Master FIM, with 15.1 billion reais under management; Verde Master FI Multimercado, with 13.6 billion reais; and Adam Macro Master FI Multimercado, with 12 billion reais, data compiled by Bloomberg show.

Hedge funds already posted net inflows of 5.69 billion reais this year through Jan. 26, Anbima said. Of the total 4.24 trillion reais in assets under management nationwide, 21 percent are in hedge funds, second only to the 46 percent in fixed-income funds.

“We are seeing many new asset-management firms being founded in Brazil with creative solutions, and that is positive for the industry,” Quintella said.

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