Ken Griffin, the bigger-than-life hedge fund investor has a soft spot for Brazil. Griffin, like the rest of the world, loves Brazil for its beaches, women and party atmosphere, but there is more to Ken Griffin’s excitement about Brazil. Mr. Griffin believes the current economic situation in Brazil is making Brazil a diamond in the rough for investors that are not afraid to take risks.
More than $4.2 billion poured into Brazil during the first half of October 2015, and it didn’t come from Brazil’s Central Bank. The money came from foreign investors like Ken Griffin on businessinsider that believe local equities are bargains right now. Two months before the surge in investments, economists were predicting the demise of Brazil’s investment future. But just like Griffin, Brazil is a hard force to keep down.
Mr. Griffin told his partners that anyone that invests in Brazil now will make money and lot of it. Five years ago Brazil was the darling of the investment world, but in 2013 things got complicated in the 2nd largest economy in Latin America, according to Griffin. That’s when Petrobras, the state-owned oil company, was accused of being part of a scandal. The scandal knocked the profitable socks off of Petrobras when the company admitted to losing $2 billion in bribes.
But the Petrobras debacle wasn’t the only nail in Brazil’s economic coffin. China’s meltdown put the finishing nail in Brazil’s economy. Now the country is in deep recession, their currency is worth half of what it was a year ago and unemployment and inflation are taking a big bite out of the country’s newly created middle class.
But all those issues don’t scare Griffin. His company Citadel LLC likes to but low and sell high. That’s why Citadel is one of the top hedge fund companies in the world, and the reason why Ken Griffin is one of the richest men in the world. But Griffin wasn’t always a billionaire. At one point in 2008, he didn’t have enough money to ride the train in Chicago. The 2008 financial meltdown claim Griffin as one of its victims, and Citadel was right there with him. The investors that knew Griffin from the days when he was trading stock in his Harvard dorm knew his situation was temporary. And they were right.
Griffin invested in risky assets that no one wanted with borrowed money six and a half years ago, and those assets did what Griffin said they would. They made everyone that believes in Griffin a lot of money. That’s why Ken Griffin hasn’t given up on Brazil. Brazil assets will come back with a vengeance and Griffin wants to be part of that experience.
Not every investor thinks like Ken Griffin. He is one of a kind when it comes to identifying financial toads that become return queens. Brazil may have political, economic and inflationary issues, but Citadel and Ken Griffin know that Brazilians don’t give up when things get tough.