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Brazil hedge fund industry contracts as banks absorb talent
Independent macro hedge fund assets in Brazil have fallen nearly 50% since 2022 to about BRL89 billion, as investors shift toward government fixed income.
Brazil’s hedge fund industry is undergoing a sharp reversal, with prominent independent managers shutting down or restructuring while major banks move in to absorb investment teams and strategies, according to Bloomberg as cited by Hedgeweek.
Arminio Fraga, a well-known Brazilian hedge fund investor and former central bank governor, transferred his funds to Banco Bradesco’s asset-management arm, saying high interest rates, weak recent hedge fund performance, and competition from tax-advantaged products have made the independent model harder to sustain.
Hedgeweek reports that Brazil’s benchmark interest rate has stayed above 10% for a fourth consecutive year, strengthening demand for government and other fixed-income investments. That backdrop has driven a significant contraction among independent macro managers, with assets across seven large independent funds down nearly half since 2022 to about BRL89 billion, and the number of macro funds down around 20% from the 2021 peak to 743 in July.
The report also points to broader outflows, with Brazil’s hedge fund sector set for a fifth straight year of net withdrawals, totaling about BRL672 billion since 2022. At the same time, assets managed by macro funds within six major financial institutions nearly doubled since 2019 to BRL542 billion as of June, reflecting a shift toward bank-based platforms.