| SAO PAULO
SAO PAULO May 8 Verde Asset Management SA,
Brazil's largest hedge fund, sees lingering risks that Brazilian
lawmakers will further water down government efforts to
streamline the social security system, a move that could hamper
austerity efforts in Latin America's largest economy.
Investors have been "complacent" with the negotiations as
the Temer administration seeks to gather lawmaker support for
the so-called pension reform, Verde money managers led by Luiz
Stuhlberger said in a monthly investor letter for April.
There is growing investor doubt over whether President
Michel Temer can implement his ambitious reform agenda, seen as
critical to curbing public debt growth and lifting Brazil from
its deepest recession ever, according to the letter obtained by
"Exacerbated optimism with Brazil - and emerging markets in
general - continues to permeate the universe of global and local
investors," the money managers wrote.
Brazil's stocks and currency ranked among the world's
best-performing assets last year, but the rally has since
stalled on concern over the shape of a final pension reform
measure. The real has moved away from two-year highs
touched in February, while the Bovespa stock index has
been nearly flat since the end of March.
A committee approved the bill last week after the government
agreed to budge on several controversial points, including
lowering the minimum retirement age for women. A lower house
plenary vote originally planned for this week has been pushed
back to allow Temer's base to muster the necessary two-thirds
support to pass the bill.
"Now, more than any time in the last seven years, it is very
hard to find cheap assets available for purchase," the letter
The Verde FIC FIM fund returned a consolidated 0.43 percent
in April, extending gains to 3.04 percent so far this year.
Still, it underperformed the benchmark CDI interbank interest
rate in both periods.
São Paulo-based Verde said last month that gains came from
local and global equity positions, as well as foreign exchange
trades involving the Brazilian real and the Korean won.
It booked a 0.3 percent loss on its fixed-income book as market
interest rates spiked due to jitters over the pension reform
(Editing by Guillermo Parra-Bernal and Jeffrey Benkoe)