(New throughout, adds details on staff, returns)
By Guillermo Parra-Bernal
SAO PAULO, Dec 3 (Reuters) - Credit Suisse Group AG plans to open a hedge fund in Brazil called Gauss next year to offer new investment alternatives for clients, such as volatility arbitrage, executives said on Wednesday.
The hedge fund, named after “the prince of mathematicians” Carl Gauss, will be managed by Fabio Okumura, former head of proprietary trading at Itaú Unibanco Holding SA, whom Credit Suisse hired in March. The fund should begin raising money next year, said José Olympio Pereira, Credit Suisse’s chief executive in Brazil.
Okumura started Gauss’ trial “long vol” fund in October with proprietary money from Credit Suisse and employees to “build some track record,” he told Reuters at the sidelines of a São Paulo event. Usually, long vol funds use projections for risk and returns generated by their proprietary trading models to assume a long position on an option when market uncertainty mounts, and the opposite if turbulence eases.
The hedge fund will target returns close to 150 percent of Brazil’s benchmark CDI interbank rate, which is at about 11 percent now, and 4.5 percent volatility, he said. The CDI is currently at about an annual 11.1 percent.
“We want to use quantitative tools but use our expertise on the use of options too,” Okumura, 49, said, adding that target investors will include Credit Suisse’s private-banking clientele.
Credit Suisse’s decision to open a fund focused on volatility underpins demand for risky investments that generate returns despite a challenging outlook in Brazil. The creation of Gauss and eventually a family of funds led by Okumura is part of Pereira’s strategy to broaden the Swiss bank’s money management and private-banking services.
In April, Credit Suisse agreed to set up a new fund venture under the control of Luis Stuhlberger, who oversaw the bank’s largest hedge fund for years. The move helped Credit Suisse retain Stuhlberger, Brazil’s most successful fund manager, whose CSHG Verde FIC FIM hedge fund returned almost 9,000 percent since its inception in 1997.
Okumura left his position as director of proprietary trading at Itaú BBA SA, Itaú Unibanco’s wholesale and investment-banking unit “voluntarily,” and took with him 10 traders.
Gauss already has a staff of 25, with some coming from rival hedge funds abroad and from rival banks in Brazil, he noted. (Additional reporting by Caroline Stauffer in São Paulo; editing by Chizu Nomiyama, Bernard Orr and David Gregorio)