Brazilian hedge funds have been through the same wringer as
the rest of the world over the last 12 months with close to 50%
of assets pressed out of the industry. Many factors accounting
for the decline are the same as elsewhere, including poor
equity market performance and investor risk aversion. However,
these have been exacerbated by Brazilian peculiarities of
continued high risk-free rates and short lock-up periods that
enable investors to bolt at will.
Although Latin American hedge funds also operate in markets
such as Mexico and Argentina, Brazil clearly dominates the
Latin American hedge fund industry. Brazilian assets under
management dropped to R$26.3 billion in mid-February from
R$50.4 billion at the beginning of 2008 within the universe of
160 onshore hedge funds measured by manager and consultant, M
Square, of São Paulo. Investors have been pouring out of
such funds and re-allocating...