WisdomTree Dreyfus Brazilian Real Fund (BZF)

Water Cooler Investing
#1

“WisdomTree Dreyfus Brazilian Real Fund seeks to achieve total returns reflective of both money market rates in Brazil available to foreign investors and changes in value of the Brazilian Real relative to the U.S. dollar”

http://www.wisdomtree.com/etfs/fund-details-currency.aspx?etfid=63

Basically, they buy T-bills and go long BRL forwards. As the forwards are in strong backwardation, the roll return replicates Brazil money market rates.

Anyway, some of the distributions look pretty good! $5.73 in 2011 - the ETF traded in the $19 to $23 range in 2011. So this is like 29% yield? I don’t think I’m looking at this correctly… Has anyone looked at this before?

#2

You’re looking at it correctly. But from a total return perspective it was only up about 4.5% over the last year. Still not bad, but the yield is wildly misleading.

#3

Right. There is exchange rate risk with this fund. BRL is a pretty volatile currency, but in general, the direction of its moves follow other risky assets. I am interested in the possibility that the yield justifies the exchange rate risk. Brazil rates are around 10% now.