What Happened to Multi-Asset Funds After the Election?
The most aggressive multi-asset funds posted returns of up to 17% right after the first round of voting, according to a survey published by InfoMoney. The rally was led by portfolios with high-volatility mandates that had structured tactical positions in interest-rate futures, equities, and foreign exchange to capture the initial price reaction to the election outcome.
This rapid move caught the attention of investors seeking quick returns, but the immediate setup has shifted. Professional managers and analysts at major banks point out that the phase of easy, linear gains from directional bets has given way to a period of preventive risk adjustment.
The surge observed in the top-performing funds does not reflect a passive stance. On the contrary, the impressive return was the result of asymmetric tactical positions that captured the temporary easing of risk premia as soon as the polls opened a new political picture.
Why Does UBS See Multi-Asset Funds as a Defensive Option?
UBS views multi-asset funds as a safer option for navigating political uncertainty in the final stretch of the election, according to InfoMoney's reporting. In the view of the financial institution's analysts, the asset class's flexibility makes it possible to protect capital where pure stock positions or long-term government bonds typically swing wildly.
Unlike a traditional equity fund—which is required to keep most of its assets allocated to stocks even on panic-driven days—a multi-asset fund takes long and short positions across multiple assets. This makes it possible to zero out fragile positions, buy hard-currency protection, or profit from shifts in the yield curve.
The asset class is seen as a tactical vehicle to navigate the stress of political outcomes without blind exposure.
Firms such as Ace Capital, led by Ricardo Denadai, are adjusting positions to avoid binary volatility.
Specialized asset managers, such as Ace Capital led by executive Ricardo Denadai, are entering this phase with renewed attention to risk sizing. In polarized environments, liquidity dries up and the market reacts violently to any campaign statement or poll result.
How Are Multi-Asset Funds Positioning for Political Scenarios?
The prevailing strategy among macro managers is to cut outright directional bets and prioritize relative-value trades. Instead of betting on whether the Ibovespa will surge or crash based on a specific outcome, managers balance defensive assets against budget-sensitive holdings while monitoring fiscal dynamics.
InfoMoney detailed that market behavior in the final stretch requires a close read of the candidates' economic policies. UBS points out that in certain election outcomes, such as a victory by Lula, multi-asset funds act as a buffer to manage shocks to interest rates and fiscal expectations more nimbly than individual investors could manage on their own.
Signals of fiscal discipline and budgetary responsibility unlock equity gains and falling interest rates.
Noise surrounding public spending pushes the yield curve higher, requiring short positions and currency hedges.
This ability to pivot between long positions (which profit from rising prices) and short positions (which profit from falling prices) is the main reason institutional banks recommend the asset class during periods of institutional stress, avoiding the risk of getting trapped in illiquid assets.
What Are the Pros and Covenants of Allocating to Multi-Asset Funds Now?
Entering a multi-asset fund right after a 17% rally requires extra caution. Retail investors frequently make the mistake of looking at recent past performance and assuming that rate of return will continue over the coming weeks.
Before signing any subscription agreement, it is necessary to weigh structural costs and mandate dynamics:
- Dynamic shock management: professional teams monitor fund flows 24 hours a day and unwind bets in minutes if the political backdrop deteriorates.
- Access to derivatives and hedging: institutional hedging instruments that the average investor rarely manages to trade through their own brokerage account.
- Tail risk and reversal: more volatile funds that gained 17% initially could also suffer sharp drawdowns if the market prices in the reverse of expectations.
- Redemption terms and taxation: settlement timelines (such as 30 or 60 days) and Brazil's semi-annual capital gains tax (come-cotas) require an investment horizon well beyond the election cycle.
Do not buy a volatile multi-asset fund trying to catch the next few days' rally: you will be buying at peak pricing with your redemption locked up for months ahead. Use the asset class as a strategic medium-term allocation in your portfolio, evaluating the manager's historical volatility before transferring any funds.
What to Watch in the Final Stretch Before Deciding Your Allocation
The most important metrics for the coming days are unit volatility and managers' cash levels. Statements from financial market figures, such as Ricardo Denadai of Ace Capital and the UBS strategists cited by InfoMoney, converge on a fundamental point: extraordinary short-term returns have already been priced in, and the game is now about capital preservation.
Watch out for rearview mirror bias: funds that deliver double-digit returns over a few weeks tend to carry high volatility. If your risk profile cannot tolerate sharp swings in your portfolio, products tied to the CDI or inflation-linked bonds continue to offer predictability without political execution risk.
If you decide to include multi-asset funds in your portfolio, prioritize traditional macro funds with a proven track record of surviving multiple election cycles. In the final stretch of an election, the ability not to lose money when consensus gets it wrong is worth far more than the obsessive pursuit of the top of the performance table.
Rico aos Poucos Verdict
The jump of up to 17% post-election rewarded managers who took on prior tactical risk, not those who arrived late to the party. For retail investors, multi-asset funds only make sense if they serve as diversified, delegated shielding against the volatility of the coming months, never as a shortcut for quick post-election gains.
