Why Iâm backing Argentina: top EMD manager reveals all
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by Chris Sloley @CitywireGlobal
Pioneerâs leading bond manager Yerlan Syzdykov is backing Argentina to rise as an emerging market bond powerhouse despite it being viewed as a country âpeople love to hateâ. #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 fundâs benchmark â the JP Morgan EMBI+ – has risen by 64.8% over the same period.
âWe are starting to see some sort of orthodox policies of the government, with control over debt levels and rebalancing of budgets,â he said.
âAnd, with regards to the devaluation of the currency, we are in a better position for exports in agricultural commodities, which is going to improve Argentinaâs external position even more.â
However, Syzdykov said the image of the country to outside investors was still one of political instability and the lingering shadow of default.
âI think that investors still donât believe that the country is ready to take off both in terms of growth potential and also because they donât think the countryâs institutional crisis has come to an end,â he said.
Argentina is currently the largest country allocation in Syzdykovâs 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 â âthe darling of emerging markets investorsâ â to suffer a slowdown in growth in 2012.
âPeople love to hate Argentina. It is not that we are looking to prove that Argentinaâs policies are better than Brazilâs, 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.â
âWe still think there is a real challenge for Argentina from a macro point of view, but it will be able to perform better vis-Ã -vis Brazil and Mexico,â he said.
The country is not without its difficulties, Syzdykov said. He is aware of concerns about the countryâs political situation and restraints on freedom of the press, as well as on opposition political parties.
âOn 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.â
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Post available in: English