This is What Brazil’s Largest Hedge Funds Expect After the Runoff Vote

The Oct. 2 vote showed a narrower-than-expected gap between front-runner Luiz Inacio Lula da Silva and incumbent Jair Bolsonaro

After the first round of voting in the Brazilian presidential elections, the outcome had some investors boosting their exposure to domestic assets.
By Vinícius Andrade
October 14, 2022 | 03:08 PM

Bloomberg — The first round of Brazilian elections made some of the nation’s largest hedge fund managers more optimistic, betting the odds of a major turnabout in Latin America’s largest economy have dwindled.

The Oct. 2 vote showed a narrower-than-expected gap between front-runner Luiz Inacio Lula da Silva and incumbent Jair Bolsonaro. On top of that, Congressional elections underscored the strength of right-wing parties, signaling that Lula would likely have a hard time trying to implement more radical measures if elected. A runoff vote between the leftist leader and Bolsonaro is slated for Oct. 30.

“Results of the first-round vote brought important surprises to most analysts,” Verde Asset Management, run by industry veteran Luis Stuhlberger, wrote in an investor note. “In case Lula wins, his room to maneuver -- especially for potential counter-reforms -- becomes more limited.”

The outcome had some investors boosting their exposure to domestic assets. Genoa Capital said it resumed a bullish bet on Brazilian stocks, while Adam Capital told clients the country stands out as one of the best places for investments on a relative basis right now.

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Still, some prefer to wait for more visibility on what the next government will look like. Legacy Capital’s founding partner Felipe Guerra said at a Bloomberg event in Sao Paulo last week that paths for the nation could be “totally different” depending on the winner.

Although former central bankers and market darlings Henrique Meirelles, Arminio Fraga and Persio Arida have endorsed Lula, the Workers’ Party candidate has yet to give much detail on his proposals and economic team.

Here’s what some of the main Brazil hedge funds said in their September investor notes:



Fund is long Brazilian stocks, while also betting on declines in US equities. First round of elections brought a positive “redistribution of risks” for local assets.

  • Absolute Vertex FIC +3.80% in September; benchmark CDI rate +1.07%

Adam Capital

Brazil’s credit and jobs data have come in above expectations. Fund is long Brazilian stocks and increased short positions on Germany’s DAX Index.

  • Adam Macro II FIC -0.26% in September
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Bahia Asset Management

First round of voting showed a better-than-expected performance from Bolsonaro, while the Congress-elect is more conservative. Fund is monitoring potential hints from both candidates on their economic teams. Bets include utilities and some consumer companies in Brazil, and small short positions on US equities.

  • Bahia AM Marau FIC +2.04% in September
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Genoa Capital


Fund resumed a net long position in Brazilian stocks and is also betting on the real strengthening against the US dollar.

  • Genoa Capital Radar FIC FIM +2.12% in September
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Ibiuna Investimentos

Fund became more constructive on Brazilian assets following results of the first-round vote and given the end of the nation’s tightening cycle. Ibiuna sees prospects for a more orthodox economic program to be implemented by the next president.

  • Ibiuna Hedge STH FIC +2.48% in September

Kapitalo Investimentos


A combination of a strong labor market and slowing inflation is supportive for Bolsonaro’s approval ratings, but opinion polls suggest that a continuity of his administration is unlikely. Fund trimmed long positions in local stocks, while also paring bets on declines in global equity indexes.

  • Kapitalo Kappa FIN +0.16% in September

Legacy Capital

Brazil’s presidential race remains wide open and Congress composition suggests that, if elected, Lula will have a hard time implementing more radical measures. Overall, first-round results suggested a better-than-expected outlook for local assets.

  • Legacy Capital FIC +1.90% in September
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SPX Capital

Fund posted its fourth-best monthly return since inception. It opened a short position in industrials and precious metals, while keeping wagers in falling rates in Brazil. The country will need an economic team with a credible plan in order to restore investor confidence, it said.

  • SPX Nimitz Feeder FIC +5.17% in September
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Verde Asset Management


Brazil’s elections mitigate the odds of tail risks for local assets, with the incoming Congress more conservative than expected. Fund boosted its position in oil, scrapped bets on higher US rates and increased wagers in Brazil inflation breakevens.

  • Verde FIC FIM -0.46% in September
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