COVER STORY Earnings for bond investors in Latin America have burst into life. The most impressive managers were those who were unafraid to pursue portfolio growth in the thorniest of places. By Katie Llanos-Small In bloom Venezuelan bonds are cheap, cheap, cheap. That's because they are priced on the expectation that the country is about to default. And yet, the best bond investors can't live without them. Several of the 10 portfolio managers topping LatinFinance's 2017 Debt Investor Scorecard cite Venezuelan bonds as a core driver of returns over the past year. It has made for a wild ride over the past year, as the country has stumbled deeper into economic and political crisis. But the bondholders who stuck with it were rewarded handsomely when the country and its national oil company PDVSA repaid $2.6 billion of debt in April. For portfolio managers who can stomach uncertainty, Venezuela is not the only place that has proven to be a winner. LatinFinance's examination of the strategies of the bestperforming bond funds shows that going against the grain has offered some big payoffs. Some nabbed Mexican bonds when Donald Trump was elected US President. Some stocked up on Brazilian paper as the political crisis deepened last year. Some added exposure to oil companies as commodity prices hit rock bottom. "You really have to be a little bit contrarian," says Luc D'hooge, head of emerging markets bond funds at Vontobel Asset Management in Zurich. The firm's Emerging Markets Debt Fund returned 8.14% in the three years to the end of March, placing it top of LatinFinance's May/June 2017 - L ATINFINA NCE.COM 11http://www.LATINFINANCE.COM