(Bloomberg) -- One of Brazil's largest independent hedge-fund managers is looking to profit off of the most hawkish central bank in Latin America.
Legacy Capital Gestora de Recursos Ltda. has added to local fixed-income and private-credit bets that would benefit from higher interest rates, while trimming exposure to Brazilian stocks, according to Gustavo Pessoa, a portfolio manager and one of the firm's founding partners. Earlier this month, Brazil's central bank delivered its most aggressive hike in almost two decades, pushing the Selic rate to 5.25% from 4.25%, in order to fight soaring inflation.
Fiscal concerns and political tensions that have made it difficult to push through changes that would bolster the economy weighed on Brazilian assets in the past few sessions, leading to a recent spike in swap rates. In its latest letter to clients, Legacy said it built a combined position of being short on the U.S. dollar against the Brazilian real while also bettingon declines in the benchmark Ibovespa equity index.
“Brazil should reach an equilibrium of higher rates, lower growth and greater political uncertainty,” Pessoa said in an interview.
Legacy sees opportunities in corporate bonds known locally as debentures, especially those in the sanitation, toll-road and telecom sectors. The asset manager, which was founded by Felipe Guerra, Pedro Jobim, Jose Eduardo Araujo and Pessoa in 2018, manages about 20 billion reais ($3.7 billion). It also has a portfolio of global stocks and a position that benefits from higher U.S. rates, according to Pessoa.
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