Three years ago, Daniel Melhem was kicked off a government delegation from Argentina that was trying to drum up investors from the Middle East after he said no one would be interested.
Now, the 44-year-old investment adviser says he’s gotten so many phone calls from clients asking about Argentina in the past year he decided to start a hedge fund dedicated to buying the nation’s securities. Melhem, who headed Morgan Stanley’s private-wealth management for Brazil, Argentina and Chile before founding Knightsbridge Partners Ltd. in 2003, plans to raise $150 million from 10 to 20 wealthy families from Latin America, the Middle East and Europe and start investing before year-end.
While President Cristina Fernandez de Kirchner is no closer to resolving a decade-long debt dispute with creditors that pushed the nation into default in July, Melhem says there’s money to be made even as Argentina’s bonds slump to an eight- month low and Bank of America Corp. recommends avoiding the country altogether. With elections 12 months away and Fernandez barred from re-election, he’s betting that a new administration is just what Argentina needs to end its isolation from international markets and open the economy to foreign investors.
“The new regime will bring big political and economic change,” Melhem, who advises clients with about $1 billion, said in an interview from his office in Buenos Aires. “Clients are asking if it’s time to get in. It’s like playing soccer. You can’t score a goal if you’re not on the field. Now it’s time to get on the field.”
Soros, Perry
Knightsbridge’s Argentina Recovery hedge fund has raised $100 million and will buy the country’s dollar-denominated bonds and American depositary receipts starting December and return investor money in three years, unless they choose to withdraw their assets before then.
Melhem, who is investing in Argentina for the first time since 2007, said his clients obtained 25 percent annual returns on real estate investments in the nation between 2004 and 2007.
Hedge funds, including billionaire George Soros’s Soros Fund Management LLC, Perry Capital and Third Point LLC boosted their stake in Argentina’s state-run energy company YPF SA’s ADRs in the second quarter, while others including Noctua International LLC and Callaway Capital Management LLC in the past year opened funds dedicated to the country.
U.S. Treasuries
Most recently Bienville Capital Management LLC started its Argentina fund in July, for which it plans to raise $250 million by year-end. Gramercy Funds Management LLC started a second Distressed Argentina Fund last month overseeing $175 million, according to a person familiar with the fund.