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Why Brazil's Risk-Free Rate Could Hobble its Hedge Funds

Brazil’s hedge funds have done well despite the stock market's pain. But can they keep their investors if risk-free rates keep rising?

By John Rumsey Armínio Fraga knows a thing or two about how to handle a lousy economy. The former emerging-markets portfolio manager at Soros Fund Management and founder, chairman and CIO of 7.4 billion-reais ($3.25 billion), Rio de Janeiro–based investment firm Gávea Investimentos once served as president of the Banco Central do Brasil.

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