Research

2019 Key Trends in Latin American Hedge Funds

Introduction

The Eurekahedge Latin American Hedge Fund Index was up 3.82% as of March 2019 year-to-date, in contrast to the 6.74% gain posted by the MSCI EM Latin America IMI over the same period. The region’s equity markets proved rather resilient throughout the fourth quarter of 2018, which saw the global equity market slumping in the face of the US-China trade war and concerns over economic slowdown. Brazil’s equity market reacted positively to the election of President Jair Bolsonaro, which improved the country’s economic outlook following the dip in mid-2018. Political uncertainties and social unrest continued to plague the region, and together with Argentina’s currency crisis and Venezuela’s economic collapse pushed Latin America’s risk outlook downward. A number of Latin American currencies also depreciated against the US dollar, and in some cases the depreciation led to rising inflation levels.

The industry assets of Latin American hedge funds stood at US$62.4 billion as of March 2019, the figure has grown by US$0.7 billion year-to-date. Industry population continued its streak of decline which has lasted for almost a decade, with 13 funds closing down in the fourth quarter of 2018.

Figure 1: Latin American hedge fund industry growth
 

Onshore funds continued to outperform their offshore peers in 2019, and collectively they manage more than 60% of the total hedge fund industry AUM of Latin America. Looking at strategic mandates, multi-strategy hedge funds took the lead by gaining 4.13% over the first quarter of the year, while on the other end fixed income hedge funds lagged behind their peers and returned 1.33% over the same period. Fund managers focusing on Brazil were up 3.82% year-to-date, outperforming their peers with different geographic mandates. Latin American fund managers with global investing mandate returned 2.58% over the first quarter of the year.

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