LatinFinance - May/June 2017 - 26
Argentina
Eduardo Costantini
SPECIAL REPORT
THE VIEW FROM
ASSET MANAGERS
PAGE 28
Debt bet
Canada's pensions
PAGE 29
Markets
A view from BlackRock
PAGE 31
Playing with fire
As Venezuela grapples with low oil prices, economic obligations and political chaos, one
hedge fund has bet with the government-until now. By Kevin Gray
F
ew trades in Latin America have been as lucrative, or as gutwrenching, as investing in Venezuelan bonds. Francisco Ghersi knows
firsthand.
Ghersi, co-founder of the Knossos Asset Management hedge fund,
has ridden the volatile price swings in Venezuela's bonds, frequently
cashing in on some of the highest yields in dollar-denominated emerging market debt.
"It is without a doubt a wild ride," Ghersi says. "Uncertainty is a constant in Venezuela. You feel like you're constantly playing with fire."
Fears among investors that Venezuela could default on its debts have
routinely turned the weeks leading up to each of its bond payments
into tension-filled, rumor-stoked periods for bondholders. "It's the
never-ending question: Will they pay or not?" Ghersi says
Investors sighed with relief in April when Petróleos de Venezuela,
Venezuela's state-owned oil company, known as PDVSA, made $2.2
billion in bond payments. For investors who scooped up PDVSA debt
when it hit lows in early 2016, the payment represented potential returns of more than 100%.
The possibility of windfalls in Venezuelan debt is what led Ghersi
and partner Carmelo Haddad six years ago to start their Caracas-based
Knossos group, which invests all of its money in Venezuelan assets,
much of it in the country's sovereign bonds and PDVSA paper.
26 L ATINFINA NCE.COM - May/June 2017
The risk/reward ratio
Last year, the fund posted returns near
50%, buoyed in large part by its bet that
Venezuela would make good on a February 2016 debt payment of $1.5 billion.
At the time, as some investors worried
whether the administration of President
Nicolás Maduro would raise enough
money to make the payment, Ghersi and
Haddad poured nearly half of the fund's
$40 million into Venezuela's 2016 global
bonds. That decision, made weeks before
the scheduled payment date, helped Knossos reap a healthy return of 12% in just over
a month.
But a steady stream of negative economic harbingers, staggering inflation, political turmoil and large anti-government
protests has divided emerging markets
investors, who are increasingly worried
about Venezuela's ability to service its
debt. Venezuela faces some $8.5 billion
in bond payments by the end of the year,
and its foreign reserves stand at around $12
billion.
To meet Venezuela's debt payments,
Maduro has drastically reduced critical
food and medicine imports and public
http://www.LATINFINANCE.COM
Table of Contents for the Digital Edition of LatinFinance - May/June 2017
Contents
LatinFinance - May/June 2017 - Cover1
LatinFinance - May/June 2017 - Cover2
LatinFinance - May/June 2017 - Contents
LatinFinance - May/June 2017 - 2
LatinFinance - May/June 2017 - 3
LatinFinance - May/June 2017 - 4
LatinFinance - May/June 2017 - 5
LatinFinance - May/June 2017 - 6
LatinFinance - May/June 2017 - 7
LatinFinance - May/June 2017 - 8
LatinFinance - May/June 2017 - 9
LatinFinance - May/June 2017 - 10
LatinFinance - May/June 2017 - 11
LatinFinance - May/June 2017 - 12
LatinFinance - May/June 2017 - 13
LatinFinance - May/June 2017 - 14
LatinFinance - May/June 2017 - 15
LatinFinance - May/June 2017 - 16
LatinFinance - May/June 2017 - 17
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LatinFinance - May/June 2017 - Cover3
LatinFinance - May/June 2017 - Cover4
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