This top-performing global bond fund is up 74% over the past year
Gecko Capital’s Maunakea emerging markets debt recovery fund has delivered an impressive 74% return over the past year and its fund manager is particularly bullish on where the two South American economies are headed. According to Jean-Jacques Durand, the fund manager, the fund aims to generate annual digital compound returns on a US dollar basis and currently yields around 10%, which is estimated “ cautiously”. It generates these returns by investing in bonds where the borrower is often in dire financial circumstances and may need restructuring or bailout – known in the trade as a “situation”. special”. Where is the investment fund? Maunakea’s two largest positions are in Venezuela and Argentina, which Duran considers one of the “most exciting and lucrative” trades he has ever made. Venezuela presented what he called “the case of the century” when bonds issued by state oil company PDVSA traded between 13-18 cents on the dollar due to the threat of US sanctions for to October last year. Instead, the US government partially lifted sanctions after the Venezuelan government began negotiations with the opposition party. “So that was the first price increase and they almost doubled [in price] in a few days,” said Duran, who previously ran the emerging markets bond portfolio at Edmond de Rothschild. The investor believes that Venezuela’s long-term potential, coupled with its ability to ease sanctions and the country’s geopolitical importance, makes it an important player. However, he emphasized the need to persevere. Be patient in these situations, as the time to investment thesis can be lengthy. The election is scheduled to be held on July 28, which will be a crucial time for domestic investments. According to the fund manager, “Do we finally have a government, whoever wins, that is legitimized and the subsequent lifting of sanctions is done by the EU or the US, or do we have a regime?” self-closing and becoming more and more undemocratic? That’s the question,” he added. ‘Very simple’ factors Duran’s approach to calculating growth potential in these markets is simple. For situations like Venezuela, profits – or recovery value – are determined by the country’s long-term capacity and willingness to pay. According to Duran, Venezuela, for example, depends on foreign capital for growth. develop oil and gas fields. The country has previously negotiated with bond investors in “good faith”, according to Duran. “They can’t close the market for years if they want the oil business and the entire economy to work.” This contrasts with the situation in Argentina, where the country has a history of defaulting on its debt, leading to serious losses for . Duran said Argentina is not dependent on capital from foreign investors because much of its economy is driven by private businesses that can operate even when the country is closed off from capital markets . When given the chance, they will default,” Duran said of Argentina. “They will try to take as much as possible from the bondholders and pay back as little as possible.” He pointed to the government surplus in the first quarter of the country are buds for his thesis. Duran said he is eyeing Bolivia, once a favorite market but has recently encountered serious problems, for opportunities when left. The country’s bonds began trading at this price. The country’s government had to deal with a worsening dollar shortage that left supermarket shelves empty and left workers unpaid. Earlier this year, Fitch downgraded the country to a CCC – or junk – rating, meaning “default is possible” amid a worsening currency crisis strong as investors question the government’s ability to keep up with interest payments “We don’t have money in the fund yet. That could be the next position,” he added.
