Tisne also invested in bonds issued by Centrais Eletricas do Para SA, the Brazilian utility known as Celpa that unexpectedly filed for bankruptcy in February 2012, and its parent Rede Energia SA. Celpa’s notes due in 2016 have lost 86 percent in the past year, according to Bloomberg estimates.

Rede Energia defaulted after Brazilian President Dilma Rousseff ordered a takeover. Those bonds have plunged 75 percent from their high of last year.

“We have a small participation in that restructuring and we are very concerned about the government’s interference,” Tisne said. “The treatment of foreign investors has been very discriminatory.”

Tisne’s fund lost 30 percent in October 2008 as markets plunged following the bankruptcy of Lehman Brothers Holdings Inc. The decline was among the worst in emerging markets, underperforming the JPMorgan Broad Latin American High Yield index, which dropped 22 percent.

‘Russian Roulette’

“The environment in Latin America has been very supportive but there are always tail risks that can hit your holdings very hard,” said Carlos Legaspy, who manages about $350 million of emerging-market debt as president of Insight Securities Inc. “In the U.S., you can diversify, but here there aren’t enough names so there’s a Russian roulette of who will blow up and you happen to be holding it.”

The yield on Chilean 10-year fixed-rate bonds in pesos dropped two basis points, 0.02 percentage point, to 5.58 percent at 11:51 a.m. in Santiago. The 10-year inflation-linked bond yield was unchanged at 2.57 percent. The two-year swap rate decreased two basis points to 5.20 percent.

The extra yield, or spread, investors demand to buy Chile’s 10-year dollar bonds instead of U.S. Treasuries rose four basis points to 92 basis points, close to the 93 basis point high since the bonds were sold last year.

Default Swaps

The cost of protecting Chilean bonds against default for five years was little changed at 65 basis points. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent if a borrower fails to adhere to its debt agreements.