A number of Brazil-based hedge funds have upped their bets against the country’s equity market on the back of an expected deterioration in Brazil’s fiscal outlook under president Luiz Inacio Lula da Silva, according to a report by Bloomberg.
Legacy Capital, XP Asset Management and Genoa Capital have all reportedly built up their short positions against domestic stocks, while Verde Asset Management, has slashed the equity exposure of its flagship fund from its usual 25% to just 15%.
The report cites Felipe Guerra, founding parter at Legacy as saying that equity markets look expensive “all over” including in Brazil. Speaking at an event earlier this month he said: “The worst-case scenario has become the base-case one” for the domestic outlook.
A recent survey of Latin American fund managers who oversee some $70 billion by Bank of America Corp revealed that 56% are actively protecting against a sharp fall in equity markets, way above the historical average of 35%.
