Bloomberg — About four years ago, traders operating out of a two-story house in Rio de Janeiro piled into a bet that oil prices would skyrocket on anticipation of a tight market and a slower transition away from fossil fuels.
The wager made Vista Capital rapidly surge in the ranks of Brazil’s asset-management industry and turned its flagship fund into the nation’s best-performing hedge fund in the past three years.
Now, though, plunging crude is weighing on the fund’s performance. Vista Multiestrategia is down more than 7% after fees this year, compared to a 1.2% gain for a basket of peers.
After months of underperformance, the fund has started dismantling the trade amid growing concern over global economic growth, it said in an investor note.
While China’s reopening may be supportive to prices, there’s uncertainty over what to expect on the demand side in developed nations in 2023, Vista wrote.
“We opted for significantly reducing our position” in oil, the fund said.
The bullish call, which at times was the fund’s largest, was trimmed by half, according to a person familiar with the matter, who asked not to be named discussing non-public information.
Vista declined to comment beyond the letter.
Oil prices have been whipsawed by concerns over the US tightening monetary policy. Brent crude is down about 43% since last year’s peak as risk appetite remained low amid broader equity market selloffs. The turmoil around Silicon Valley Bank sent it down tumbling again this week.
Vista Capital was founded in 2014 by Joao Landau and Joao Lopes. The firm saw assets under management surge to over 6 billion reais ($1.1 billion) from the initial 30 million reais and profited from the wild swings across commodities markets in the past years.
Vista has Persio Arida — a former Brazilian central bank president — as a partner and lured XP Inc., the country’s largest brokerage firm, as a minority holder last year. Arida, who previously served as chief executive officer at Banco BTG Pactual, is also Landau’s stepfather.
The Vista Multiestrategia fund is up 77% in the past 36 months after fees, beating all 167 local hedge funds tracked by Bloomberg. The Anbima Hedge Fund Index, which tracks a basket of local hedge funds, rose about 26% in the same period.
--With assistance from Rakteem Katakey
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