Business · Markets · 1 hr ago
Brazilian investment funds lose R$157.5 billion after Lula's re-election
Brazilian investment funds lost R$157.5 billion in value after Luiz Inácio Lula da Silva won re-election.
The loss, measured from the day after the vote through Wednesday, came from falling returns, which declined 1.44% across the industry.
Funds had largely bet that Brazilian assets would rise after a victory by Lula's opponent, Flávio Bolsonaro.
Among 682 large share and multimarket funds surveyed, the average loss on Monday was 6.9%, while seven fell by more than 40%.
The losses hit funds already struggling to compete with Brazil's 13.75% benchmark interest rate, and the industry had seen net withdrawals in September.
Managers are reviewing their portfolios and restructuring teams, while one firm denied rumors that it would close.
The sharp market reversal has prompted funds to rethink their strategies, though the sources give no further details on what changes they will make.
Brazilian investment funds lost R$157.5 billion in assets after Luiz Inácio Lula da Silva’s re-election, according to a survey by Economática.
The decline reflected a 1.44% fall in returns from the day after the election victory through Wednesday.
Equity funds recorded double-digit losses, while seven large equity and multimarket funds fell by more than 40% on Monday, October 26.
Many investors had positioned for Brazilian assets to rise on a win by Flávio Bolsonaro, leaving some funds exposed when markets fell.
Managers cited high interest rates and said some were reviewing portfolios and restructuring teams after the losses.
- Who
- Brazilian investment funds and their managers. Lula was re-elected.
- What
- The funds lost R$157.5 billion in assets as returns fell 1.44%.
- When
- From the day after Lula’s election victory through Wednesday. Seven funds fell by more than 40% on Monday, October 26.
- Where
- Brazil’s investment market.
- Why
- Many funds had positioned for Brazilian assets to rise if Flávio Bolsonaro won, and markets fell after Lula’s re-election.
This story does not have two clearly opposing sides.
Mantaro’s fund rose 17.93% on the trading session after the first round of voting.
Mantaro’s equity fund fell 32.24%, and seven large equity and multimarket funds recorded losses of more than 40%.
Brazilian investment funds lost R$157.5 billion in assets, with returns down 1.44%.
- Total fund assets lost
- R$157.5 billion
- Change in returns
- Down 1.44%
- Large funds with losses above 40%
- 7
- Average fall in 682 surveyed funds
- 6.90%
- Mantaro equity fund fall on October 26
- 32.24%
- Mantaro fund assets
- R$373.2 million
3 sources
What people are saying
In 2014, between the first and second rounds, we hedged because we thought protection was actually cheap there. This time, we didn’t think it was cheap, which turned out not to be true, but nobody imagined a price move like this.