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From the Opalesque team: Singapore-based GFIA, the hedge fund consulting firm focused on developing markets, reports in its semi-annual Latin American Hedge Funds Note that as of July 2008 Brazil has grown to represent approximately $40bln of the hedge fund assets investing in Latin America (up from $31bln in 2007).
Expectations of Latin American hedge fund strategy shifts
The first local Latin American hedge funds appeared in Brazil in the mid-1990’s. GFIA identifies an onshore hedge fund industry of 340 funds (managed by 169 different managers) and reports almost half are macro funds, which have seen a decline in performance over the past few years. “Given the scarcity of opportunities in the macro trading space, we believe that macro managers may be forced to reshuffle their business models and “reinvent” themselves,” writes Peter Douglas, Principal at GFIA.
Two strategies which have gained footing in the region are long/short equities and fixed income. Long/short equities is the fastest growing strategy with an increase in both directional and more neutral managers. While many investors are concerned about the availability of instruments to hedge equity risk, GFIA notes that in the Brazilian market for example, in addition to single stock shorts, hedge funds can use index futures/options, ETFs and stock options that trade over $3bln a day (notional value).
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