In a monthly letter to clients, Brazil’s largest hedge fund, Verde Asset Management, said that foreign investors’ were overly optimistic about its home nation’s economy.
Saying that foreign investors’ had “exagerated optimism,” the firm said that the sentiment was “disconnected from medium-term reality.” The fund said cautioned investors about the nation’s financial outlook, and said that an economic recovery was unlikely any time soon.
The hedge fund earned a consolidated return last month of 3.87%, a solid gain after losing 1.7% in April. The company said that its wager that the Brazilian real would decline against the U.S. dollar helped fuel the gains.
“The dollar recovered against all currencies as it became clear that the strength of the U.S. economy was not structurally hurt by the heavy winter or the collapse of investments in oil exploration,” the firm’s managers wrote in the letter.
Verde suspects that the Federal Reserve could raise interest rates near September, which would further bolster the greenback.
Verde has more than 30 billion reals ($9.7 billion) in assets under management.