The Brazilian capital market faced challenges earlier this year due to crises involving companies like Americanas and Light. Investors withdrew funds from investment vehicles, and risk perceptions in other companies’ shares heightened. This situation provided valuable lessons for fund managers who had to adapt to these adverse conditions.
The Importance of Diversification in Brazilian Capital Market
One crucial lesson that emerged from these experiences is the importance of diversification. Both Capitânia and Augme Capital emphasize the significance of having a well-diversified portfolio. Each of their funds contains a broad range of assets, with no single asset representing more than 0.5% of the total portfolio. This diversification strategy proved valuable during the crises.
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The Danger of “Easy Money”
It’s also essential for investors to be cautious about seeking “easy money” or “miracle assets.” Diversifying portfolios extensively or selecting skilled fund managers can help mitigate risks.
The Need for Adaptability
After the crises earlier in the year, Capitânia adjusted its portfolio to include more defensive assets. They took advantage of opportunities in the market, particularly in companies with higher credit ratings that offered attractive spreads. As spreads begin to close, Capitânia is considering riskier assets again, as they can offer higher returns.
The Risk of Rising Debt in Brazilian Capital Market
The risk is managed carefully, as taking on credit has become expensive for companies. Firms with significant debt in the Brazilian Capital Market are a cause for concern. Despite these concerns, Augme Capital’s director believes it’s “extremely unlikely” that any large company will face debt payment problems in the medium term.
Source: InfoMoney