Bridgewater Makes a Bold Bet on Brazil

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.

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.

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