Hedge fund Gávea posts heavy losses in March on Asia, Brazil bets

miércoles 6 de abril de 2016 19:33 GYT
 

By Guillermo Parra-Bernal and Lawrence Delevingne

SAO PAULO/NEW YORK, April 6 (Reuters) - Two funds managed by Gávea Investimentos Ltda, the hedge fund run by former Brazilian central bank President Arminio Fraga, posted heavy losses in March as bets on declining prices for financial assets in Asia and Brazil soured.

Money managers at the Rio de Janeiro-based firm said in an investor letter that a strong global market rally led investors to pour more of their money into riskier assets last month. A weaker U.S. dollar hampered some of Gávea's bets, including so-called short-positions in currencies and equities in Brazil and Asian counterparts.

The current global dichotomy in which the U.S. economy is growing faster than most other economies in the face of a weaker dollar "does not sound right," the letter said. A recent increase in global risk-taking sounds contradictory at this point because a declining dollar would imply tighter financial conditions for other countries.

Officials at Gávea could not be reached for comment after working hours.

In contrast, Gávea doubled down on a bet that the Mexican peso and the euro would keep advancing, helping mitigate losses. This year, Gávea has stepped up wagers on Mexico's currency and against Brazil's, a sign that disparities between Latin America's two biggest economies will grow faster.

In March, the firm's Gávea Fund lost an estimated 4.32 percent, the biggest since October 2008, according to the letter. The higher-risk Gávea Fund Plus shed 6.47 percent, the second-worst monthly performance since the fund's inception in August 2013.

In Brazil, Gávea cut short positions in the currency and stocks, and remained bought on interest-rate contracts. The firm continued to bet against the currencies of other commodity exporters and emerging market nations, hedged by the Mexican peso's strategy.

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 1.02 percent of capital for Gávea Fund and 1.76 percent for Gávea Fund Plus.

So far this year, the $502 million Gávea Fund has lost 4.28 percent, while Gávea Plus has fallen 6.47 percent.

A former fund manager for billionaire George Soros, Fraga was central bank president from 1999 to 2003. He then founded Gávea, named for an upscale Rio neighborhood that is also home to a tropical rainforest park. (Editing by Leslie Adler)