Latin America: Brazilian investors run for fixed-income protection

Thu Apr 23, 2009



John Rumsey, São Paulo

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...

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