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| The Capitania team: arbitrage opportunities from out-of-line onshore and offshore pricing |
Brazil's hedge funds break through
Capitania is one of a rare breed in Brazil’s hedge fund community: a quant specialist, whose strategies include arbitrage and relative value. Amaury Junior, who previously worked for Bank of America and JPMorgan as a derivatives trader, founded the firm.
Capitania’s initial mandate was to manage part of Bank of America’s Brazil exposure, which comprised $300 million in cash instruments and $6 billion in exotic derivatives.
Today the firm manages money for a range of clients – its offshore hedge funds have $80 million of assets and its onshore hedge funds and private portfolios have $250 million. The funds invest across all Brazilian instruments including asset-backed securities, commodities and equities. The firm takes a long-term approach and focuses more on international investors than local.
Capitania also has an advisory division, which structures and executes financial risk management services for large corporations and financial institutions. Other advisory services include financial risk analysis and risk management policies and implementation guidelines.
On the fund management side, the firm seeks to profit from cyclical volatility in the emerging markets. It also tries to take advantage of any mispricings driven by different divisions of international banks trading Brazilian assets. Onshore and offshore pricing for the same asset is often out of line.
The firm has a barbell-like return profile: it seeks to perform well if Brazilian markets are either very strong or very weak. Supporting the firm’s investment strategy are dedicated proprietary risk management systems and a fully built-out middle office and administrative infrastructure. “We are one of the few hedge funds to have developed our own back-office and risk management systems,” says Arturo Profili, a partner at the firm.