14th August, 2018
Last year, Brazilian farmer Gustavo Lopes sized up his sugarcane plantation against his soybean fields.
7th February, 2018
Marcio Appel, a 45-year-old money manager whose main fund topped 89 percent of its peers in the past year, is betting on Brazil’s benchmark stock index to double over the next 12 months.
He has already raised R$23 billion (US$7 billion) in assets for Rio de Janeiro-based Adam Capital, the firm he co-founded in 2016, and expects that figure to reach about R$40 billion by the end of 2018. That could make his company the biggest independent hedge-fund operator in Latin America. Brazilian equities represent “the most obvious” opportunity globally “by far,” Appel says. He’s betting the Ibovespa could reach 160,000 points. The gauge traded at 81,460 on Tuesday after hitting a record of 85,530 points on 26th January.
“Equity market prices are ridiculous and that’s because nobody has any.” Appel said. “A lot of people got burned in the past and that’s the kind of situation that we like technically.” His recent success is an extension of the victories Appel notched in his two-decade career as an asset manager for large banks, including posting returns of almost 200 percent while managing the Galileo fund for Banco Safra SA during his stint there from 2008 to 2015.
Appel said he and co-founder Andre Salgado, who he met while at Banco Santander Brasil, don’t sweat the small stuff when figuring out which stocks to invest in and instead look at the macro trends and how they link to the profitability of companies. “Nothing that we do is based on details,” Appel, who has a degree in engineering from Brazil’s Technological Institute of Aeronautics and a master’s in business administration from the University of Michigan, said in an interview last week in São Paulo. “Another manager told me that when he finds an opportunity in Indonesia he sends five guys over there. If I had to do that, it means the position isn’t obvious and I’ll stay out of it.”
About two thirds of the investments Adam manages are offshore, with just a third in Brazilian assets. The Adam Advanced Master, with R$2.4 billion in assets, has returned 33 percent in the past 12 months, beating 97 percent of its peers. The Adam Macro Master -- the largest hedge fund in Latin America, according to data compiled by research firm Preqin -- has returned 19 percent over the past year. Adam’s latest fund will probably close in March when it reaches R$10 billion from the current R$6.5 billion that has been raised, he said. After that, Adam will open subsequent funds with longer withdrawal periods of 60 then 90 days, according to Appel. Adam has grown to 21 employees, from 12 when it started. The firm focuses on liquid assets with a requirement of a market capitalization of US$50 billion for equities abroad. It already has about 35,000 individual investors in its funds.
Outside of Brazil, Adam is wagering on a rebound in energy prices lifting both traditional and renewable producers, and mentioned the restart of nuclear reactors in Japan. In Latin America, Adam is shorting Mexican assets, seeing an inevitable shakeup in the automobile industry hitting exports and slowing growth. The fund manager sees the Brazil equity rally as somewhat immune to politics, even as the country gears up for presidential elections in October with the risk of a radical taking over. He takes comfort in the fact that former President Luiz Inacio Lula da Silva, an early frontrunner in polls, was all but banned from trying to seek re-election after an appeals court upheld his graft conviction last month. The economic rebound is being driven by the private sector and companies have emerged from the crisis and recession stronger than before, he said. “None of the viable candidates that are left will have a radical agenda,” Appel said. “We don’t need much help, just don’t mess with it. Even if you do nothing, it’s good enough.”