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ECONOMY | 13-07-2023 18:44

Brazilian hedge fund Vista makes small Argentina bet ahead of election

One of Brazil’s best-performing hedge funds is building a position in Argentina ahead of a presidential election that could result in a regime change.

Vista Capital, who manages one of Brazil’s best-performing hedge funds of the past three years, is building a position in Argentina through ADRs ahead of a presidential election that could result in a regime change.

The position is small, a person familiar with the situation said, asking not to be named discussing non-public information. It comes as the hedge fund said in an investor note this week that 2024 could bring in “positive shocks in politics and the economy.”

“A more significant regime change, which would include a more front-loaded fiscal adjustment and a robust reform agenda, would allow for a relevant re-pricing of assets,” Vista wrote. “We see interesting asymmetries in some sectors of the stock market, especially in financials.” 

Vista declined to comment beyond the letter. 

In the investor note, the fund says current Economy Minister Sergio Massa has the incentives to reach a deal with the International Monetary Fund, while the El Niño event could favour a recovery in agriculture exports next year. It also touted the possibility of conservative Patricia Bullrich consolidating votes for the opposition. 

Still, Vista cautions to what it deems a “tortuous” path ahead of the primaries in August, and said the nation remains vulnerable to a run on the currency amid adverse shocks. 

Argentine assets have rallied in the past month after Massa — who is seen as more pragmatic within the left-leaning ruling coalition — announced his bid, boosting odds the October vote ushers in a market-friendly administration. Bullish investors have been arguing that negative outcomes have already been priced in.

The US$70-million Global X MSCI Argentina ETF is up 36 percent since the beginning of the year, while the nation’s bonds due in 2035 are up four cents on the dollar in the past month to around 31 cents. 

Vista Capital was founded in 2014 by João Landau and João Lopes, and manages over five billion reais (US$1 billion) in assets. Its Vista Multiestrategia fund is up 56 percent in the past 36 months after fees, beating 99 percent of peers tracked by Bloomberg. The Anbima Hedge Fund Index, which tracks a basket of local hedge funds, rose about 27 percent in the same period.

by Vinícius Andrade, Bloomberg

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