Top Brazil Hedge Funds Curtail Commodities Among Growth Fears

Investors are increasingly concerned about the impact of higher interest rates on growth expectations

Legacy Capital trimmed the net exposure of its flagship hedge fund in the past month, particularly in commodity markets
By Vinícius Andrade and Felipe Saturnino
July 14, 2022 | 02:21 PM

Bloomberg — Brazil’s largest hedge-fund managers cut their commodity wagers as growing fears of a global economic downturn threaten the furious rally that took place in the first half of the year.

Legacy Capital trimmed the net exposure of its flagship hedge fund in the past month, particularly in commodity markets, on higher odds of “abrupt” moves by monetary authorities as they seek to tame inflation. Ibiuna Investimentos, which manages over 30 billion reais ($5.5 billion) in assets, scrapped a bullish position in oil prices.

Investors are increasingly concerned about the impact of higher interest rates on growth expectations instead of focusing exclusively on inflation data, and this new dynamics “points to a hostile environment for risk assets in the third quarter,” Ibiuna said in a note to clients.

West Texas Intermediate crude oil is down 21% since peaking last June, with rising Covid-19 cases in China and volatility in global markets offsetting prospects of a tight market. And analysts at Citigroup Inc. warned that oil could drop to $65 a barrel by year-end in a recession scenario.


Kapitalo Investimentos said its Kappa and Zeta funds reshuffled bets on prices of raw materials last month. They opened a short position in zinc and corn, boosted bullish wagers on copper and also pared bets in oil and wheat.

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June capped the best half-year for local hedge funds since 2015 in terms of performance, with an 8.3% gain for a basket of funds compared with 5.4% for the CDI benchmark used by the industry. SPX Capital’s Raptor fund paced gains, with a 41% advance in the first six months of the year. Still, outflows for the industry continued for a tenth month as investors shift to fixed income to take advantage of higher rates.

Here’s what some of the main Brazil hedge funds said in their June monthly letters:



Fund is keeping a lower net exposure, with small positions in stocks. Bets on higher rates across different nations were closed amid a market correction.

Absolute Vertex FIC +1.93% in June; benchmark CDI rate +1.01%

Adam Capital

Funds are long Brazil equities and inflation-linked bonds, neutral US stocks. New levels of commodities and stock markets point to the start of a slowdown in economic activity.


Adam Macro II FIC -1.36% in June

Link to letter

Bahia Asset Management


Brazil’s next president will have a hard time trying to cut additional expenses, which should lead to more inflation and higher rates. Fund has a net short position in US stocks, while it’s also long commodity-linked currencies against the euro and the British pound.

Bahia AM Marau FIC +1.32%

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Genoa Capital

Firm opened a long position in the US dollar against the Brazilian real, cut payers and increased steepeners in the shorter-end rates of Brazil’s swap curve. Wagers on flatteners and higher breakeven inflation rates were closed.


Genoa Capital Radar FIC FIM +2.01%

Link to letter

Ibiuna Investimentos


Efforts from the Brazilian government and lawmakers to cut taxes and lower fuel prices at the pump added “relevant” uncertainty to inflation estimates. Global macro headwinds coupled with Brazil’s fiscal worries and political noise warrant a cautious stance.

Ibiuna Hedge STH FIC -0.33%



The fund opened short positions in corn and zinc, stepped up bullish bets in copper and soybean, and cut those in oil and wheat. It also built a position that gains from lower rates in Brazil and Mexico.

Kapitalo Kappa FIN FI -0.17%

Legacy Capital


Brazil’s central bank should end its hiking cycle with the Selic rate at 13.50% or 13.75%, and keep borrowing costs at that level for a long time. Prospects of a global recession and a high inflation turn the outlook more dangerous and volatile.

Legacy Capital FIC +0.41%

Link to letter


SPX Capital

The fund sees opportunities to bet on higher rates in some emerging markets, saying that central bankers will need to keep tightening their monetary policy going forward

SPX Nimitz Feeder FIC +2.40%

Link to letter

Verde Asset Management

Firm marginally trimmed its Brazil stocks, while resuming bets on global equities.

Verde FIC FIM -1.86%

Link to letter