Bridgewater Makes a Bold Bet on Brazil | Chief Investment Officer

Typically known for touting China, the world’s largest hedge fund is feeling a little bullish on another emerging market as of late.

Strategists working at Bridgewater Associates recently told Reuters the $160 billion Connecticut-based fund sees Brazil’s economic growth potential to be “the strongest in the world” in 2020.

In a letter to clients last week, the firm said Brazil should be well on the path to recovery after a 2015-2016 recession. That’s because of low foreign debt levels, “plenty room for real yields to fall,” and the Brazilian market’s cheapness due to general pessimism about it.

“Given that pricing already discounts extreme weakness and [local political] mismanagement, we think there is considerable room for Brazil’s economy and assets to surprise on the upside,” said the strategists at the titanic hedge fund founded by Ray Dalio.

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Bridgewater did not go into detail on asset performance nor what in Brazil it would allocate to.

After years of corruption and unfulfilled promises by its government, investors are watching Brazil’s new president, Jair Bolsonaro. The right-wing leader is fixated on reviving the debt-stricken country, firstly by fine-tuning its pension system. The firm’s strategists too are banking on Brazil’s social security reform,.

Bolsonaro is scheduled to meet with President Donald Trump, whom he has been compared to, in Washington this week to discuss issues in Venezuela.

Bridgewater could not be reached for comment.

Tags: Brazil, Bridgewater Associates, Hedge Funds, Jair Bolsonaro, Ray Dalio

One of London’s oldest hedge funds is closing its flagship fund.

Rubicon Fund Management has decided to close its 20-year-old Global fund due to rough market swings and poor performances in recent years.

The firm, run by founder Paul Brewer, a former global co-head of foreign exchange at Salomon Brothers, was one of the few institutions to post positive returns during the financial crisis. In fact, Rubicon gained 44% in 2008.

It also did well between 2014 and 2016, again increasing by double digits following Donald Trump’s US presidential election victory.

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However, Brewer’s bond, currency, stock, and commodity-based macro bets have not been as strong more recently. The Global fund, once managing $1 billion, has dropped to about one-quarter of that due to losses and investors withdrawing their holdings. It fell 35% in 2017 due to shrinking 10-year US government bonds, and only returned 2% last year. To add insult to injury, the fund declined by another 3.3% in January, reported Bloomberg.

Following these underwhelming years, Brewer has decided to shut down his baby, and cut jobs. This also coincides with many other hedge funds deciding to close or lay off a bulk of their staff after last year’s volatility proved to be more than they could handle.

Marco funds in general have been having a rough time. Although they are up 0.61% year-to-date, they are down -2.44% in the past 12 months, and -0.93% in the past 36 months, according to industry benchmark HFRI indices. Overall, the hedge fund industry ended 2018 in the red, losing -3.42%, according to Preqin.

Rubicon will still carry on through its artificial intelligence-based Dynamic fund. The smaller, long-only fund, which has just under $100 million, tries to pick cheap assets on the rise using computer algorithms.

Rubicon confirmed the news, but declined comment.

Tags: Hedge Fund, Hedge Funds Closing, Paul Brewer, Rubicon