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Brazil election risk cools hedge funds’ real carry trade exposure

Managers have started cutting exposure to the Brazilian real and local bonds after a strong run for the carry trade.

Reported · Written up by our desk · Hedge Funds

Brazil’s upcoming presidential election is starting to unsettle investors, prompting some hedge funds and other asset managers to reduce exposure to the Brazilian real and local bonds, according to a report cited by Hedgeweek.

The trims come after a strong period for Brazil’s carry trade, where investors borrowed in lower-yielding markets to invest in higher-yielding assets in Brazil.

Hedgeweek reports that the shift reflects growing concern that election-related uncertainty could disrupt returns tied to the currency and local rates.

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