Amidst a scenario of exchange rate volatility and a marked rise in the dollar against the real, investment funds have been revisiting their portfolios with dollarized assets and paying more attention to strategies to mitigate risks – with hedge operations – and reinforce your theses. Especially because there is a consensus among experts interviewed by Broadcast Investimentos that the dollar should not see a significant drop anytime soon.
“Investors as a whole had a very positive scenario for the exchange rate at the beginning of the year. Everyone was estimating that the dollar could drop below R$4.80, there were people even talking about R$4.50. We had a scenario that the exchange rate would be more favorable here in Brazil, which did not happen due to some external factors and ‘something’ internal”, assesses João Piccioni, fund manager at Empiricus Gestão.
On the external side, the deterioration in expectations of a drop in interest rates in the United States supported the exchange rate, while in the local market, the lack of traction in the prices of agricultural commodities left the real weaker, assesses Piccioni. “As a result, the market increased the currency’s target for the end of the year. We expect something between R$4.90 and R$5.10,” he says.
On the other hand, despite the dollar’s volatility having risen in recent weeks, it remains historically low, in the opinion of Daniel Campanini, manager and responsible for the multimarket funds area at Western Asset. And, observing the American economy and hoping for a “soft landing”, the manager had been carrying for some time a short position (which bets on a fall) in the dollar against emerging currencies – such as the real and the Mexican peso.
However, when the year turned and inflation figures began to get worse abroad, Western began to reduce the risk in its portfolio, reducing its short position in dollars. According to Campanini, there has been some migration to being short in developed currencies, such as the euro and pound. “We still believe in soft landing [nos Estados Unidos]but the conviction is lower than in the recent past”, he says.
In addition, Western is taking the opportunity to add options to the portfolio, that is, negotiating the rights to purchase and sell financial instruments at a fixed value. “The protection options helped us suffer a little less in the short term,” says Campanini. And, more recently, with the stronger dollar, the manager even started to make options with a more bullish (optimistic) characteristic, in case the dollar drops below R$5 again.
At Empiricus Gestão, Piccioni says that funds that invest abroad do not have hedges, so the rise in the dollar favors the products. According to the manager, it is a policy that has always been adopted for international investments, especially shares, so that investors have exchange rate exposure “given that companies abroad are remunerated in dollars”. “It’s our thesis.”
In local funds that have active positions in dollars, such as multimarkets, Empiricus Gestão is “letting the boat run”, without changing the weights, says Piccioni. There are no sold positions, but rather long ones (which bet on the rise) in dollars, to provide a counterbalance to the Brazilian stock market. “Historically, this relationship has always worked, so we use the mechanism as a balance”, says the manager.
Neutralized exchange variation
Currency fluctuations can significantly impact investment returns, for better or for worse. At Daemon Investments, the quantitative multimarket fund – which has a large position in global currencies – is hedged with dollar futures contracts across its international exposure, precisely to avoid sudden movements, according to Sergio Rhein Schirato, founding partner of the manager. “What the Brazilian shareholder receives is the return on our positions, not the exchange rate variation”, he says.
As an example, Schirato notes that, in mid-April, the fund’s operations were generating gains of around 1.5%, a value that would be reduced if the devaluation of the real was taken into account. “It would be difficult to sell investors the thesis that we have a set of models that generate returns, but whose final result is subject to fluctuations in the dollar. So we protect 100%”, says the manager. He adds that opting for currency exposure or not is valid, but it depends on the investor’s appetite.
