A sharp reversal of Brazil's bull market in stocks - along with fickle investors - tests the strength of South America's biggest hedge fund market
By John Rumsey
In May May 2006, with Brazil's stock market climbing dizzily and the economy booming on trade in iron ore, petrol and agro products, high-flying macro hedge fund firm Mauá Investimentos of São Paulo made a big push into equities. The move - the launch of an equity-only fund, Mauá Bolsa, and an aggressive macro fund, Mauá Top FI Multimercado - seemed logical, as the fund manager had been rapidly gathering assets on strong returns and was eager to gain exposure to a lucrative new asset class.
For a time, Mauá's equity-charged strategy worked nicely. In 2006, the flagship Fundo Mauá rose 31%, followed by a 6% gain in 2007. By last month, however, the equities Carnaval was long over. Stocks were oscillating wildly, so much...