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Brazil hedge funds adjust derivatives after rally ahead of runoff
The first round left Bolsonaro about 2 percentage points ahead of Lula, helping drive a jump in Brazilian equities and currency while interest-rate swap contracts fell.
Brazilian hedge fund managers are rebalancing derivatives after a sharp rally in local markets following the first round of Brazil’s presidential election, according to reporting by Bloomberg as summarized by Hedgeweek.
Managers who had bet on right-wing candidate Flávio Bolsonaro’s stronger showing are adjusting options and derivatives exposures after he finished around 2 percentage points ahead of President Luiz Inácio Lula da Silva, a result that boosted Brazilian equities and the real while pushing down interest-rate swap contracts as investors weighed lower borrowing costs.
Hedgeweek reports that Ace Capital, Vista Capital, and Legacy Capital were among the strongest performers on Monday. Ace Capital founder Fabricio Taschetto reduced options positions that had gained value during the rally, while Vista Capital’s João Landau planned similar adjustments ahead of the presidential runoff on 25 October.
Legacy Capital’s co-founder and chief investment officer, Felipe Guerra, said the firm made only marginal reductions to some positions, expecting further gains across Brazilian assets ahead of the runoff.