James Dondero Co-founder and President of Highland Capital Management, has had an interest in Argentina since 2012, so much so that his company has a dedicated team and office in Sao Paulo. According to Mauro Staltare, a Highland Capital Management analyst,” Argentia is different.” ” Argentina is an island within Latin America. Its an uncorrelated Investment for at least the next two to three years,” Staltari said. “Of course, a rise in interest rates by the Fed will affect the curve and yields, but Argentina has drivers of its own, such as the normalization of energy tariffs, and for better or worse, it’s distinctive from the rest of Latin America.”
James Dondero’s team is focusing on the changes in Argentina as it emerges in the global market as a well-structured player. One strategic move the Argentinian Government made was to lower its energy tariffs, this allowed the country to raise 16.5 billion in bond revenue when other countries were trading at negative yields.
Dondero and his team have developed an investment strategy built around the economic recovery of the new pro-business administration.
— Highland Capital (@HighlandCapMgmt) June 14, 2018
Highland Capital Managment has been working to expand its equity holding in Argentina as well as its bond allocation strategy. They want to position their portfolio to align with the prioritization of economic reforms being implemented in the country. Read more about James at Crunchbase.
The firm is leaning towards provincial debt, one major factor is that Argentina’s 23 provinces issue debt that yields between 150 to 250 basis points of spread over sovereign debt of equal duration.
For investors who do have an interest in Argentina, there is still a real risk. The country’s proximity to other Latin American countries can make it susceptible to fraud and government breakdown. While the country has made many economic initiatives, the deficit and inflation still need improvement. Visit Highland Funds to know more about James Dondero.