Credit Suisse-Backed Hedge Fund Regrets Buying the Dip Too Soon

This content was published on March 20, 2020 - 16:44

(Bloomberg) -- Verde Asset Management, Brazil’s biggest independent hedge fund manager, told shareholders it was wrong to start bargain hunting so soon after markets plunged.

“Analyzing our recent decision-making process, we made an important mistake: we started buying too early,” Verde said Friday in a letter to clients. Earlier this month, the fund said it was gradually boosting positions in equities, focusing on the U.S. stock market.

The blunder is proving costly for the asset management powerhouse: Its CSHG Verde FIC FIM fund is having its worst month since at least 1997, according to data compiled by Bloomberg. Its month-to-date loss is about 15%. Credit Suisse Group AG is a minority stakeholder in Verde Asset Management.

The firm, which has about 45 billion reais ($9 billion) under management, said it underestimated the pace of the coronavirus spread and had hoped markets would be able to go through March and April “without great panicking.” The fund also mentioned Italy’s slow reaction to the outbreak.

“The fundamentals of our mistake were added to the fact that global markets are going through a huge liquidity crisis,” the manager wrote.

Led by industry veteran Luis Stuhlberger, Verde says there’s still opportunity for gains in the market, as the recent correction “more than reflects” any economic fallout from the virus-induced crisis.

The firm is still buying U.S. shares at a thrifty pace, as the nation brings the “best combination of fiscal and monetary firepower with corporate profitability.” Verde is also keeping some exposure to Brazilian stocks and longer-term real rates.

One of the best-known hedge funds in Brazil, Verde has had a 14,711% return in local currency terms since its inception in 1997. The recent market rout has been a tough one for Brazil’s best fund managers, with heavy losses all around. Some even apologized on social media, while others are using the market plunge to pile on some stock bets.

©2020 Bloomberg L.P.

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