SAO PAULO, June 23 (Reuters) - Verde Asset Management SA, Brazil’s largest hedge fund, is heavily positioned in short-term, inflation-linked government debt, reflecting political and economic uncertainty in Latin America’s No. 1 economy, the Valor Econômico newspaper said on Friday.
The paper quoted Chief Executive Officer Luis Stuhlberger as saying Verde, which oversees about 21 billion reais ($6.29 billion) in its namesake flagship family of funds, had half of that allocated in so-called NTN-B notes of short duration. Short durations increase sensitivity to interest-rate cuts.
Assuming that inflation-adjusted rates decline to 4 percent in a year or two, the NTN-B note maturing in 2022 seems “a good investment” yield 5.6 percent now, Stuhlberger told the newspaper. Verde’s media relations firm confirmed his remarks.
In the interview, Stuhlberger said Verde’s failed bets in recent years might stem from an “optical illusion” among investors that things in Brazil will stay business as usual, despite mounting fiscal and political challenges.
For months, Verde has argued that investors in Brazil were overly complacent about President Michel Temer’s ability to implement an ambitious economic reform agenda - seen as critical to curbing public debt growth and pulling the economy out of a recession entering a third year.
Verde’s global calls include a short-selling position on the Chinese renminbi, underscoring a bet that the Asian country’s currency is mispriced amid fiscal largesse, Valor said.
Verde, which oversaw a total 32 billion reais in assets as of the end of May, is also net long Brazilian equities, with a focus on domestic-oriented companies, Stuhlberger told Valor.
$1 = 3.3370 reais Reporting by Guillermo Parra-Bernal; Editing by Tom Brown