(Bloomberg) -- Jive Investments, Brazil’s largest distressed-asset manager, plans to raise as much as 7 billion reais ($1.3 billion) next year, looking to capitalize on opportunities created by the coming presidential election. 

“There may be a credit contraction and less appetite for Brazil among international investors, so we want to be prepared to allocate a lot of investment during this election scenario,” Guilherme Ferreira, a Jive partner, said in an interview. 

A polarizing election next October between President Jair Bolsonaro and former President Luiz Inacio Lula da Silva could bring volatility to markets, putting pressure on the exchange rate and inflation. A decline in Bolsonaro’s popularity is intensifying risks for government creditors, because he is seeking to divert funds in the budget toward poverty programs.

Slower economic growth may also increase the amount of distressed assets for sale, as more corporations and individuals struggle to pay debts on time, Ferreira said. Economists predict Brazil’s gross domestic product will expand 1.9% next year, down from the 5.2% expected for 2021, according to forecasts compiled by Bloomberg. 

Jive, which is targeting professional investors for its new distressed fund, plans to offer currency hedging for international investors.  

Total credit in Brazil’s financial system reached 4.3 trillion reais in August, with delinquency rates of about 2.3%, according to the central bank.

Ferreira’s company raised its third big fund last year, totaling 4 billion reais. The fund, which was distributed exclusively by Credit Suisse Group AG, is posting annual returns of 9%. But Ferreira said part of that fund has already been invested, and much more will be needed to take advantage of the opportunities expected next year. 

Jive’s first fund, of 500 million reais raised in 2015, has posted average annual returns of about 21%, and the second fund, which raised 1.75 billion reais, has a yield of 17% a year, according to Ferreira. 

XP’s Investment

In June, XP Inc., the biggest brokerage firm in Brazil, bought a minority stake in Jive, which has 8 billion reais under management. About 20 of Credit Suisse’s wealthy private-banking clients also acquired shares. The partnership will allow Jive to start offering less complicated distressed investments to XP’s mom and pop investors, Ferreira said, adding that because the investments are less risky they also offer lower yields. 

The plan is to start three funds for individual investors, raising as much as 900 million reais: a real estate fund, a credit pension fund, and one that’s new for Brazilian markets -- a publicly traded version of the traditional so-called FIDC, which purchase receivables in a transaction similar to a securitization.

The alliance with XP gives Jive more than just distribution power. XP’s network of 9,000 independent investment advisers also offers Jive new investment opportunities from clients who may want to sell distressed assets including real estate, paintings, shares from startups or even copyrights. 

Jive has deployed more than 3 billion reais in the past 18 months, including co-investments from clients, and more than doubled its headcount to 260. Ferreira said the firm will continue hiring, and expects to reach about 350 employees by the end of next year.

The secondary market for legal claims is another area Jive is pursuing. Brazil’s federal government is trying to postpone payments on part of the 90 billion reais coming due next year related to court losses. 

“There are many foreign owners of large legal claims trying to leave, worrying about the exchange rate, fiscal issues and the possibility of installment payments,” Ferreira said.


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