Latin American junk bonds have returned 245 percent over the past 10 years in dollar terms, more than double the return for the region’s investment-grade debt or emerging-market corporate notes, according to Bank of America Corp.
“It’s one thing to be lucky and in the right assets, and it’s something else to be the best manager of the right assets,” said Eric Conrads, a former chief investment officer of Chilean pension fund company AFP Capital who now manages $750 million of Latin American equities at ING Investment Management in New York. Tisne is “very methodological and detail-oriented. He has a process and he sticks to it.”
Average Rating
As of the end of October, the average rating of the bonds in the fund was B, five levels below investment grade.
Bonds from PDVSA, as the Venezuelan oil company is known, have rallied over the past year as investors piled into the country’s debt to profit from the end of President Hugo Chavez’s reign.
Cemex’s notes due in 2020 have returned 35 percent in the past year as the biggest cement maker in the Americas reached an accord to extend maturities on $6.7 billion of loans and as it benefits from a rebound in the U.S. housing market.
Cemex’s bond yields exceeded 20 percent in October 2011 on concern the company would fail to meet terms of a $15 billion loan that helped it avoid a default in 2009. They have since fallen to 7.19 percent.
Among Tisne’s biggest holdings are also bonds of Bio Pappel SAB de CV, the Mexican paper maker that defaulted twice in the past decade. Yields on Bio Pappel’s dollar-denominated notes due 2016 have tumbled 5.2 percentage points to 9.77 percent in the past year as increased demand for paper and cardboard packaging boosted earnings.
Not all of Tisne’s investments in speculative-grade companies have panned out. He held bonds sold by Banco Cruzeiro do Sul SA, the Brazilian lender that defaulted on $1.6 billion after the central bank said it would be liquidated in September.
Celpa Bankruptcy