LatinFinance - May/June 2014 - 31

Robbins.
Volatility has demanded some tough
investment choices - rather than the
blanket allocation that used to be sufficient
for good returns. over the past year, for
the best funds, that often meant avoiding
companies that ended up defaulting and
moving to hard currency debt, rather than
local currency.
"a good decision we made was to put
more focus and more risk toward sovereign
dollar debt and to be a more nimble in
corporate debt while being extremely picky
on the local debt," says Bareau.
Beyond that, successful managers have
different strategies when it comes to latin
america: whether it is their strategies
towards distressed sovereigns, or inflationlinked notes, or their own off-the-beatentrack favorites, such as colombia's pipeline
sector or oil service companies in Brazil.
"We are an active manager so we change
our positions, and one position that i've
had in the portfolio for some time is inflation-linked bonds in Brazil, which actually
have very high real yields of around 6%,
which we think is a very interesting and
compelling fixed income opportunity," says
Sam finkelstein, fund manager at Goldman
Sachs asset management.
Penny foley, another emerging market
portfolio manager at tcW, says the best
returns can often be found in the least

RobeRt haLL, mfs

"THE KEY IS TO FIND
GOOD OR IMPROVING
FUNDAMENTALS THAT
HAVE YET TO BE FULLY
REFLECTED IN BOND
PRICES"
touched countries. "in 2012 the best performing asset was Venezuela," says foley.
"in 2013, it was argentina, so what has
tended to be the best producer of upside
have been those countries that are going
through a major transition from a very low
level of basic expectations. that has characterized both of those countries for a while
and there is a lot of volatility around that
process."
Venezuela and argentina were beginning
to attract more investors in april, after signs

of a more pragmatic approach to government economic policy in those countries .
"on the dollar-denominated side, it looks
like you may be at a turning point for high
yielding credits like argentina and Venezuela," says Robbins. "We quite like argentina
and, to a certain extend Venezuela, because
we're seeing some pragmatic decision from
those guys," agrees Bareau.
at the same time, fund managers are
diversifying into even less known investment destinations, taking calculated risks
after looking very closely at the issuer's
fundamentals.
"We've found good diversification potential in some of the smaller sovereigns such
as Paraguay and Guatemala, and we've
also found a number of attractively valued
corporates," says Robert Hall, emerging
markets portfolio manager at mfS.
"for sovereigns, quasi-sovereigns, and
corporates, the key is to find good or improving fundamentals that have yet to be
fully reflected in bond prices." LF

How the funds are ranked
LatinFinance's 2014 debt investor survey is compiled from annualized gross returns data supplied by
Lipper. The survey considers debt funds with over $100 million of assets under management, and allocations of at least 28% to Latin America. Asset managers are ranked according to their performance over the
past three years. Where a fund manager has two funds in the top ten, the lower performing one(s) have
been stripped out.

Low returns
2014 debt investor scorecard
Annualized Gross Returns (%) USD
Assets ($m)

Launch

Allocated to
LatAm (%)

1 yr

3 yr

5 yr

10 yr

-1.90

6.66

10.93

8.27

Benchmark
JP Morgan EMBI +
JP Morgan EMBI Global

-1.05

7.15

11.54

8.31

Lipper US Index - Emerging Market Hard Curr Debt

-2.33

4.91

12.17

7.99

Lipper US Index - Emerging Mrkt Loc Cur Debt Funds

-7.50

12.08

Manager

Fund

GMO

Emerging Country Debt Fund; III

3,098.40

1994

37.31

3.45

11.60

21.27

Fidelity

New Markets Income Fund

4375.6

1993

33.86

-0.43

8.41

14.60

9.93

Goldman Sachs

Emerging Markets Debt Fund; Inst

1398.8

2003

45.62

0.34

8.37

14.79

10.30

JPMorgan

Emerging Markets Debt Fund; Select

443.8

1997

40.17

-1.27

7.90

14.72

8.97

MainStay

Global High Income Fund; A

270.5

1998

28.9

-1.32

7.35

13.82

9.59

MFS

Emerging Markets Debt Fund; I

5897.4

1998

31.04

-1.08

7.33

12.68

9.89

Federated

Emerging Market Debt Fund; A

141.5

1996

37.17

-2.21

7.27

15.44

9.57

Columbia

Emerging Markets Bond Fund; A

741

1996

42.04

-3.22

7.26

15.16

Payden

Emerging Markets Bond Fund; Investor

797.4

1998

37.21

-2.77

6.96

12.30

9.06

TCW

Emerging Markets Income Fund; I

5038.6

1998

33.27

-1.93

6.81

16.15

10.89

Source: Lipper, data to 31 March 2014

May/June 2014 - l atinfina nce.com 31
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