August 13, 2019 / 10:46 PM / 2 months ago

UPDATE 2-Brazilian fund skirts disaster after Argentina rout

(Updates Tuesday story throughout with data provided on Wednesday)

By Rodrigo Campos

NEW YORK, Aug 13 (Reuters) - A Brazilian asset manager posted a deep loss in its long-only equity fund as its bullish stance on Argentina crumbled this week, while its larger long-short hedge fund escaped with a relatively minor loss, internal fund data showed on Wednesday.

Newfoundland Capital Management's long-only strategy, heavily skewed to Argentina's stock market and with roughly $300 million under management as of the end of last week, took a substantial hit as the Argentine market tumbled 38% on Monday.

According to updated data the fund provided on Wednesday, the losses stemmed mainly from declines in U.S.-traded shares of agricultural company Cresud and electricity distributor Edenor, which respectively have fallen about 40% and 65% this week alone.

Argentina's benchmark stock index is down 33% so far this week after results from a primary election on Sunday dealt a blow to market-friendly President Mauricio Macri's re-election chances in October.

Newfoundland's hedged strategy, however, largely protected its $500 million long-short hedge fund, according to internal data shared with Reuters and an email sent to clients.

Newfoundland's co-founder Jonathan Myles Rosenthal said the hedge fund's losses this week are about $5 million, or about 1%, far from the paper loss that an unhedged strategy would have yielded.

He said the fund was the "largest equity holder of single stock puts in the market."

The strategy, involving put options and stock shorts, was shared with Reuters on the condition of not disclosing more specific details.

Regulatory filings from last May, listing holdings as of March 31, had shown an even greater Argentina exposure at Newfoundland. Disclosure of stock holdings as of the end of June, including Argentine ADRs, are due to the U.S. Securities and Exchange Commission on Wednesday.

The filings will show, among other things, how funds in general increased their exposure to U.S.-traded Argentine stocks that were included in May in the widely followed MSCI emerging markets index.

Current filings show billionaire investor David Martinez's Fintech Telecom LLC held 30.8% of Telecom Argentina as of mid-April. That long position would have suffered a one-day loss of over $132 million on Monday.

Large bond holders also figure among those seeing losses from Monday. Franklin Templeton's flagship $33 billion Global Bond Fund, which has 3.64% in Argentina and is overseen by Michael Hasenstab, was down 1.79% on Monday alone -the worst performing fund in its category, according to Morningstar data.

Reporting by Rodrigo Campos; additional reporting by Christian Plumb in Sao Paulo and Jennifer Ablan in New York; editing by Dan Burns, Rosalba O'Brien and Richard Chang

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