Funds run by Brazil's Gávea post solid returns as currency bets pay off

miércoles 6 de enero de 2016 18:55 GYT
 

By Guillermo Parra-Bernal and Lawrence Delevingne

SAO PAULO/NEW YORK Jan 6 (Reuters) - Two hedge funds run by Brazilian investment firm Gávea Investimentos Ltda posted double-digit returns last year as bets on slumping currencies in Brazil and Asia helped offset losses from Latin American investments.

Last year, the firm's Gávea Fund and the higher-risk Gávea Fund Plus returned an estimated 11.52 percent and 18.79 percent, respectively, reversing losses in 2014, a letter to investors said on Wednesday. The Gávea Fund had $530 million in assets under management at the end of December.

Gávea, founded by former Brazilian central bank president Arminio Fraga in 2003, kept risk exposure unchanged in December. Daily value at risk, a widely followed gauge that measures the maximum amount an investor can lose in a trading session, ended last month at 0.6 percent of capital for Gávea Fund and 0.9 percent for Gávea Fund Plus.

Their performance highlights Fraga's successful bet on a slump in Brazil's currency. The country is grappling with the impact of a swelling budget deficit, rapidly eroding political support for President Dilma Rousseff and fallout from slowing growth in China. Last month, the real hit a near 13-year low.

"The caution is seen in the financial sector, which explains the increase the risk premium, the exchange rate and market interest rates" in Brazil, the letter said.

Gávea officials could not be reached for comment.

The HFRX Macro/CTA Index, which tracks hedge funds using a similar strategy as that of Gávea, rose 5 percent through November. Both Gávea funds are within the so-called macro fund class, in which fund managers bet on macroeconomic trends using a variety of security types.

Last year, currency strategies were the major source of returns for both funds, the letter said. Equities contributed less than 1 percent of excess returns for the Gávea Fund and Gávea Fund Plus, while rate investment posted losses last year.

In July, Fraga and his partners agreed to repurchase Gávea from JPMorgan Chase & Co, to focus on private equity and hedge fund investments. A JPMorgan Asset Management affiliate kept Gávea's real estate and equity businesses under terms of the deal. (Editing by Tom Brown)