In the high-friction environment of the Brazilian credit market, where rising interest rates and corporate insolvency have created a climate of general anxiety, Rafael Fritsch sees a rare moment of structural clarity. The CIO of Root Capital, which manages approximately R$ 8 billion ($1.4 billion), suggests that the current volatility isn’t just noise—it’s a price signal. For Fritsch, the lead-up to 2026 represents a unique window for investors who possess both the methodology to parse distress and the courage to act on it.
Root Capital’s strategy deviates sharply from the industry standard of broad diversification. While many credit funds maintain portfolios of 100 to 150 different assets, Fritsch limits Root’s exposure to between 30 and 50. This isn’t merely a preference for concentration; it is a recognition of the limits of human oversight. Fritsch argues that it is "humanly impossible" to maintain rigorous due diligence on 150 different positions, particularly in a market like Brazil, where he contends there simply aren't 150 high-quality assets available to be found.
This disciplined, narrow-aperture approach allows the firm to find value in unconventional places, such as the complex restructuring of the mining giant Samarco. By looking past surface-level distress to identify tangible, sometimes "unusual" guarantees that others overlook, the firm bets that the next two years will reward those who can distinguish between a failing business and a mispriced risk. In a market where many are retreating, Fritsch’s thesis is simple: the risk is high, but the premium for precision has never been more visible.
With reporting from [InfoMoney].
Source · InfoMoney
