Category: Brazil

Rio-based JGP, a hedge fund started in 1998 by former Pactual partners, is planning on setting up an all Brazil equity fund this year, Rodrigo Azevedo, former central banker and partner in charge of macroeconomic strategy, tells LatinFinance. The fund manages four multi-strategy vehicles, with a combined $1.1bn in assets under management. Targeted regions include developed countries and EM. JGP, whose strengths lie in hedging and fixed income-oriented global investing, has been building up equity research and trading capabilities, says Azevedo. He notes that the new fund would likely be of limited size, given relatively low liquidity in the Brazilian secondary equity market.

Fortis will sell ABN AMRO’s Brazilian asset management activities to Santander for $310m. Fortis got the asset management business when Fortis, Santander and RBS bought ABN, but the banks found that it was most suited to the local capacities of ABN’s Banco Real unit, now part of Santander. Fortis will continue to develop LatAm institutional sales outside Brazil, as well as certain LatAm equity investment teams.

Brazil has become the world’s biggest emerging equity market and the 10th largest in the world, accounting for 14.95% of MSCI GEMs, up from 5.3% in 2002, according to Citi. Recent outperformance, particularly in the oil sector, pushed Brazil ahead of China and Korea for the first time. “Brazil’s MSCI free float is at an all-time high $509bn, while Russia, India and China are down 11%-32% from their highs,” says Citi. The shop says Brazil will hold top EM this position in the long term. “Short term, however, we see Brazil as ignoring risks of any sort (earnings downgrades and hikes in domestic interest rates); we view Brazil as overbought, expensive and overdue a pause,” the house states. Petrobras is the largest company in EM, followed by Russia’s Gazprom.

Growth in the Brazilian economy will moderate owing to external factors, but trade diversification and a firm domestic market will help it counteract the shock in the medium term, says Moody’s. Long term upside will depend on reforms and the economy’s ability to save and invest, the agency adds. “The economy will grow at a speed consistent with its increased potential capacity, thus preserving macroeconomic stability,” Alfredo Coutino, a senior economist at Economy.com says. The analyst estimates a GDP growth around 5.0% in 2008, down from 5.5% last year, rising to 5.3% in 2009, driven by domestic sources and complemented by commodities. Moody’s does not anticipate major inflation problems in the short or medium term, since monetary and fiscal discipline will be maintained. It predicts inflation will stay around the official target of 4.5% and interest rates to decline to a neutral zone, particularly during 2008.

The Carlyle Group is heard to be raising a new real estate private equity fund for LatAm. A recently formed team, headed by Eduardo Machado in Brazil and Jaime Lara in Mexico, is targeting $350m-$500m for its first LatAm fund dedicated to the asset class, according to private equity investors, bankers and real estate company executives based in the region. David Rubenstein, Carlyle’s co-founder, was understood to have been in Sao Paulo earlier this year feeling out investor appetite for tickets in a Carlyle vehicle. Carlyle executives in Brazil declined to comment specifically on the new fund, beyond saying that the group has not announced plans to raise a fund and currently does not invest from a dedicated vehicle. Nonetheless, Carlyle Latin America Real Estate Partners, as the LatAm group is calling itself, has already clinched one deal in Brazil, a $70m acquisition of Scopel, which converts empty lots into infrastructure-ready plots. It has also closed two other transactions — one in Mexico and one in Brazil — that combined are worth $30m, say executives at the firm. In Brazil, Carlyle will target project development over buying existing assets, Machado tells LatinFinance. Scopel, an existing company with assets, is an exception to the rule going forward, he adds.