May 10, 2016 / 10:12 PM / 2 years ago

Brazil hedge fund Verde gains in April as currency, rates rally

SAO PAULO, May 10 (Reuters) - Verde Asset Management SA, Brazil’s largest hedge fund, posted the strongest returns in five months in April as an across-the-board market rally in Latin America’s largest economy helped fuel wagers on the country’s currency and local debt.

Increased optimism that President Dilma Rousseff will be removed from office and replaced with a more market-friendly administration helped alter the trend of Brazil’s asset prices in recent weeks, Chief Investment Officer Luis Stuhlberger wrote in a letter to investors released on Tuesday.

According to the letter, Verde FIC FIM fund’s returns last month reflected the “view and positioning of the firm about Brazil asset classes,” which include a stable currency and bigger room for a decline in debt yields. Stuhlberger stuck to his call that domestic equity prices are reflecting “exaggerated optimism” over Rousseff’s departure.

Verde FIC FIM booked a consolidated return of 1.76 percent in April, the biggest since November. That compared with a return of 1.08 percent posted by Brazil’s benchmark CDI interbank interest rate in the month.

The fund’s currency book gained 0.45 percent last month. The fixed-income investment book rose 0.51 percent, while the equities book dipped 0.20 percent in April.

Verde FIC FIM was up 1.08 percent in January-April, below the CDI’s 4.34 percent return in the same period. In March, the fund lost 2.47 percent, its steepest monthly decline since October 2008.

With the U.S. dollar failing to follow a defined trend in the wake of a decision by Federal Reserve policymakers to delay a much-anticipated interest rate increase, the fund’s attentions have turned to China, where the potential for deterioration remains “significant,” the letter said.

At the end of last month, Verde oversaw about 35 billion reais ($10 billion) in clients’ money through a number of investment vehicles. One of them is the larger Verde Master FIM fund, which had nearly 13 billion reais under administration in late April, according to Thomson Reuters data. ($1 = 3.4730 Brazilian reais) (Editing by G Crosse)

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