In a digitally connected world where people are increasingly avoiding human contact, Bienville, a $1.4 billion alternative asset manager, has found success by moving in a different direction. The New York-based fund is unique from several perspectives. Its various hedge fund options are not delineated based on strategy type, as is the common categorization, but rather opportunity set. When it finds an idea suitable for its audience of endowment or family office investment managers, it likes to take investors to the region, have them meet government officials and corporate CEOs face to face as they engage with the hedge fund’s thought leaders throughout the trip. And the strategy appears to be working judging by Bienville returns.
Bienville buys Brazil before elections
The Bienville Brazil Opportunities Fund, LP, one of several hedge funds managed by founders Ralph Reynolds, Cullen Thompson, and Billy Stimpson, returned an estimated +5.3% for the month of August and is up +22.9% year-to-date, net of fees and expenses.
The firm had been researching opportunities in Brazil since 2013, a period when a corruption scandal had deeply marred investment in the region. Then in August 2016, they launched a hedge fund targeting opportunities in the area at a time when the political winds were changing. With investments in the region beaten down, they approached investors with an idea.
As evidence of corruption grew against “the incompetent and embattled Brazilian president” Dilma Rousseff, Bienville approached investors with the thesis she would likely be removed from office, according to an investor letter reviewed by ValueWalk. “Because the populist policies she pursued had wreaked havoc on the Brazilian economy, her removal could catalyze a recovery in Brazil, marking the end of a 3-year recession and 5-year bear market in equities,” the fund reasoned.
But rather than just rely on potential investors to grasp the enormity of the situation from a distance, they invited them to travel to Brazil and meet with political leaders and corporate executives. Bienville paid for working meals, while the investors covered their travel costs.
“We think we’ll be more successful executing a contrarian thesis if people see what they’re investing in,” Cullen Thompson, Bienville’s president and chief investment officer, told the New York Times last year.
Since this trip, investors have been rewarded not only in Brazil, but also in Argentina and in purchasing real estate along the Gulf Coast of Alabama and Florida after the BP oil spill wrecked havoc in the region. In contrast, to Brazil’s largest hedge fund which is bearish on the country.
Bienville finds investment themes that are beaten down
The common themes surrounding Bienville’s investment ideas often involve investing in beaten up regions that mainstream investors have forsaken. The strategies can vary and often involve real estate, debt and equities. What differentiates the hedge fund is the opportunity, not the strategy.
The Gulf Coast Real Estate fund, for instance, which is currently winding down, invested in the region in the wake of one of the worst man-made environmental disasters in the region’s history. It has delivered a net cumulative return of 63.8% to investors since it was launched in 2012, according to a source familiar with the fund strategy. Likewise in 2014, the political situation in Argentina was less than certain, the firm launched the Bienville Argentina Opportunities Fund, LP, which returned 22.9% in 2017 and is up 70.0% since inception.
When potential investors visited Argentina in 2014 prior to the 2015 presidential elections, they met with presidential candidates as well as economists and business leaders to get a sense for the opportunity. Fund managers use this as an opportunity to conduct detailed due diligence, all within view of potential investors.
A source close to the strategy said the investment trips are a highly successful aspect of the fund’s investor education and form the core of their research, which was categorized as a “transparent process.” It is unclear how much time was spent on the beach during these working trips.