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Brazilian hedge funds ditch domestic bets

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Brazil’s top performing hedge funds have cut domestic wagers because of the country’s recent political problems and are instead betting on everything from a rally in crude prices, to short strategies for another slump in US stocks, according to a report by Bloomberg.

The storming of government buildings in the country’s capital last week by rioters who refuse to accept the result of presidential elections won by Luiz Inacio Lula da Silva, is the most obvious example of the country’s political tensions and informs many fund managers’ current ‘conservative approach’ to domestic risk.

The Asa Hedge fund, which topped all 188 Brazil peers last year with a 39% gain, has begun 2023 with a short bet on US equities as its main position, and no exposure to local assets. 

XP Asset Management meanwhile, is also betting on additional declines in the US stock market even after the S&P 500 Index saw its worst annual drop since 2008, down 19% last year, while Norte Asset Management’s equity-focused hedge fund, which was up 28% last year, is betting on an increase in oil prices on the assumption that global supply will remain tight. 

An increase in oil prices is also among the wagers at Legacy Capital, whose flagship fund was up 24% last year, with the firm betting that China’s economic reopening will boost demand. 

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