Brazil’s Top Hedge Fund Says Real Rally Almost Over

Date: Thursday, July 30, 2009
Author: Alexander Ragir, Bloomberg

Most of the gains in Brazil’s currency and interest-rate futures markets this year are over, said Beny Parnes, chief strategist at BBM Gestao de Recursos Ltda., manager of Brazil’s top-performing hedge fund.

BBM pared back leveraged bets that yields on rate futures will fall and the real will strengthen after its Bahia 1 Fundo Investimento Multimercado jumped 86 percent this year, said Parnes. Bahia 1 has outperformed all 683 Brazilian hedge funds that manage more than 100 million reais ($53 million) as the central bank slashed the benchmark rate five times and the real surged 22 percent against the dollar.

“There’s less opportunity and less risk,” said Parnes, who served as a central bank director from 2002 to 2003. “In the first half, we had a clear view: That global growth would decelerate, that rates were really high, that the currency would strengthen. Now we think that the significant currency movements have already happened.”

BBM’s funds still hold “very slight positions” betting that yields on rate futures will fall and the currency will strengthen, Parnes, 50, said in an interview in Rio de Janeiro.

The 506 million-real Bahia 1 fund rose 44 percent from its inception in May 6, 2008 to year-end even as markets tumbled amid the global credit crisis, according to data compiled by Bloomberg.

‘Few Opportunities’

“We don’t believe you have to be in the market all the time,” Parnes said. “There’s usually a few opportunities each year and you just have to take advantage of them.”

The real is the best performer among the 16 most-traded currencies against the dollar this year as the central bank cut the benchmark lending rate to a record 8.75 percent, helping fuel speculation Brazil would be among the first countries to emerge from the global recession. The real fell 0.8 percent today to 1.8955 per dollar.

BBM also manages BBM Ciclotron FIC FI Multimercado hedge fund, which held the second-ranked spot, gaining 68 percent this year. Rogerio Xavier is the lead portfolio manager for hedge funds at the firm. BBM has limited its stock holdings because it predicts Latin America’s biggest economy will shrink about 0.5 percent this year, Parnes said.

To contact the reporter on this story: Alexander Ragir in Rio de Janeiro at aragir@bloomberg.net