Fund sticks to small caps and creams rivals

Brazil’s smaller companies will continue to outperform the Bovespa index after gaining twice as much as the broader market last quarter, said Marcelo Mesquita, partner at Leblon Equities Gestao de Recursos Ltda. Mesquita, whose funds have beaten more than 93 percent of peers this year by buying smaller banks and avoiding commodity producers, said these companies will benefit more from falling interest rates and are being hurt less by the global economic slowdown.
“This is a trend that should continue,” Mesquita, a former UBS AG analyst in Brazil who helps manage about 150 million reais ($64.8 million) at Leblon, said in an interview from Rio de Janeiro. “Smaller companies have more growth potential and they are made up of more diverse industries for stock picking. Large-caps are unpredictable because of their cyclical nature in Brazil.”

The BM&FBovespa Small Cap index of companies smaller than $3.2 billion in market value, surged 50 percent last quarter, compared with the 26 percent gain for the benchmark Bovespa index. The broader index is made up of about half commodity stocks, while the so-called small-cap index is comprised of mostly utilities, homebuilders, retailers and food companies.

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