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Why I’m backing Argentina: top EMD manager reveals all

by Chris Sloley @CitywireGlobal

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Pioneer’s leading bond manager Yerlan Syzdykov is backing Argentina to rise as an emerging market bond powerhouse despite it being viewed as a country ‘people love to hate’. #adp02

Syzdykov, who manages the Pioneer Funds Emerging Markets Bond portfolio, revealed why the South American country is his favoured investment pick despite it still being seeen as tainted by its 2002 default.

Over the past three years, Syzdykov has returned 103.9% in the emerging bond space, while the fund’s benchmark – the JP Morgan EMBI+ – has risen by 64.8% over the same period.

‘We are starting to see some sort of orthodox policies of the government, with control over debt levels and rebalancing of budgets,’ he said.

‘And, with regards to the devaluation of the currency, we are in a better position for exports in agricultural commodities, which is going to improve Argentina’s external position even more.’

However, Syzdykov said the image of the country to outside investors was still one of political instability and the lingering shadow of default.

‘I think that investors still don’t believe that the country is ready to take off both in terms of growth potential and also because they don’t think the country’s institutional crisis has come to an end,’ he said.

Argentina is currently the largest country allocation in Syzdykov’s portfolio. He has 9.4% of his fund invested in the country, ahead of Brazil (8.9%), Venezuela (7.2%) and Turkey (6.4%). However, Syzdykov said he is not simply being contrarian by shunting Brazil into second place.

However, Syzdykov does expect Brazil – ‘the darling of emerging markets investors’ – to suffer a slowdown in growth in 2012.

‘People love to hate Argentina. It is not that we are looking to prove that Argentina’s policies are better than Brazil’s, by no means do we want to say that. There is a relative value argument in Argentina and it is quite out there in terms of the spreads and the ratings to compensate investors for their patience.’

‘We still think there is a real challenge for Argentina from a macro point of view, but it will be able to perform better vis-à-vis Brazil and Mexico,’ he said.

The country is not without its difficulties, Syzdykov said. He is aware of concerns about the country’s political situation and restraints on freedom of the press, as well as on opposition political parties.

‘On politics, there is still the question of the health of Cristina, and we wish her well, and we hope she can come back to fill the void in terms of governing. We are going to maintain our position in Argentina having suffered last year in performance terms.’

Contact the Gateway to South America team to learn about the best investment opportunities in the region. The company is a benchmark for foreign investors wishing to invest in Argentina, Brazil, Uruguay and Chile, providing expert advice on property acquisition and investment tours.

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