Is a more sophisticated hedge fund industry in Brazil
better positioned to weather the wave of volatility?
By Eric Baum
The U.S. credit crunch finally spilled over to Latin America
last month, putting an end - at least temporarily - to Brazil's
five-year bull run. In the first 16 days of August, as
investors pulled out and liquidity evaporated, the Bovespa
Index fell 9.17% while emerging market currencies and bonds got
pummeled. Some of Brazil's biggest hedge funds also lost
ground, including the long/short Mauá Brasil Equities
Fund, which dropped 8.89% through midmonth.
Still, the credit crisis, with roots in the U.S. subprime
mortgage meltdown, took longer than expected to hit Brazil.
That in turn fueled speculation that the traditionally high
correlation between the United States and Latin America's
largest economy was beginning to break down.
Whether or not that decoupling comes to pass, recent