Poppe is responsible for the strategy of the BNY Mellon Brazil Equity Fund, a fund launched in 2017 that invests in shares of the South American giant, with the MSCI Brazil 10/40 NR Index as its benchmark. The strategy manages over $600 million in AUM.

The portfolio manager’s view is that Brazil is once again a “hard topic.” The macroeconomic scenario includes a fiscal deficit, inflation, and slowing growth.

“Brazil is not growing as much as one would like,” he acknowledged. “There is a lack of credibility in the government, the fiscal deficit has increased, inflation is rising, and this year and next, the country’s economy will be affected — but there won’t be a recession,” he described.

Indeed, Brazil’s CPI accelerated in February, climbing five-tenths to 1.3%, reaching 5.06% annually. It was the largest increase in the consumer price index for a February since 2003, and annual inflation stood at its highest level since September 2023. This price surge contrasts with the economic slowdown, and the Central Bank resumed its interest rate hiking cycle to try to control inflation.

Poppe emphasized the importance of being aware of the Brazilian economic context as investors, but encouraged those seeking exposure to the Brazilian equity market to do so through active and disciplined management.

Brazil, as the largest economy in Latin America, offers a dynamic market with leading companies in strategic sectors such as consumer goods, energy, financial services, and technology. The fund’s strategy aims to capture opportunities in companies “with solid fundamentals, sustainable growth, and competitive advantages, combining diversification with rigorous risk control.”

Ahead of the Next Economic Cycle

The PM forecasts that Brazil will grow by 1.5% in 2025, and between 1% and 1.5% in 2026. In 2024, Brazil’s GDP grew by 3.4%. “The scenario is difficult for companies, but at the same time, stocks have dropped so much, are so cheap, that we see an opportunity for international investors,” he said.

Now then… the annual yield on a Brazilian bond investment in local currency is around 14%, so the big question for investors — even posed by Poppe himself during his conversation with Funds Society — is “when” to enter stocks.

“The macro scenario has turned more negative,” he explained. “Many investors are comfortable investing in bonds. However, from here on, we see flows into equities. I’d say that within the next 6 to 9 months, Brazilian equities could experience a rally. We expect interest rates to come down again, which is why we have increased our exposure to discretionary consumption. The fund is already prepared for the next economic cycle,” he assured.

Poppe noted that over the past 2 years, the fund leaned into defensive sectors, such as food producers, which are very strong in Brazil and benefit from the country’s power as a commodity producer.

The fund offers diversified exposure, with an overweight in food producers and exporting companies such as Embraer. It also has exposure to telecom and utilities, since “they offer a lot of yield.”

Balancing Cyclical and Defensive Sectors

With an approach that combines fundamental and quantitative analysis, the strategy seeks to identify undervalued companies with solid business models, prioritizing those with high cash flow generation, sustainable competitive advantages, and a clear long-term growth strategy. The portfolio consists of 25 to 40 stocks, allowing for a detailed focus on each investment without losing diversification. It maintains a balance between cyclical and defensive sectors, combining high-growth industries such as technology and consumer with traditionally more stable sectors such as energy and utilities, which helps reduce volatility.

Regarding Petrobras, Poppe said, “The company is doing very well, but the fund hasn’t invested in its shares for two years. Looking ahead, investors will be entering the cyclical equities sector, where we are already positioned,” he emphasized.

The portfolio manager also mentioned that Brazilian investors are currently at their lowest level of exposure to local equities, but said this dynamic will change in the coming months. “For now, investors are choosing to buy bonds. It’s not that money will move quickly into equities; it will shift gradually. I’m a firm believer that investing long-term and actively pays off more, even when investing in the small and mid-cap sector.”

In 2024, the BNY Mellon Brazil Equity Fund had a negative return of 24.77%; in 2023, the fund returned nearly 25%. As of March 17, 2025, the fund had accumulated a year-to-date return of 10.50%.