(Bloomberg) -- Emilio Botto, chief investment officer at BNP Paribas Asset Management Argentina, has dodged financial calamities -- from hyperinflation to defaults and currency controls -- his entire three-decade career.
It was no different on what he calls Argentina’s “Black Monday.” While some peers in Buenos Aires lost upwards of 40% on that day alone, Botto’s Optimum Renta Fija Estrategica fund soared 21% in local currency terms. That was its second-best gain since inception in late February as it outperformed more than 450 portfolios tracked by Bloomberg.
Botto’s secret: He avoided Argentina altogether. What’s more, he piled 30% of his portfolio into bonds from a single company, Brazilian petrochemical producer Braskem Finance Ltd.
“Most local funds lost a lot of money on Black Monday,” Botto, 53, said in an interview. “Our fund only has Brazilian and Chilean bonds, so we avoided the Argentine risk and benefited from the peso devaluation.”
Putting cash into hard-currency debt outside Argentina helped him avoid the damage from the peso’s plummet to a record low. Aside from Braskem bonds, his top holdings include notes from Brazilian steelmaker Gerdau SA, Chilean pulp and paper firm CMPC and electric utility Enel Generacion Chile SA.
Spurred by Electoral Fear, Argentines Seek Refuge in Chile Bonds
Many of Botto’s competitors had their money tucked in Argentina’s most liquid shares, which got pummeled as the benchmark equity gauge suffered the second-biggest stock sell-off of the past seven decades. He said it’s tough to say how the nation’s hard-currency debt will perform because so much rides on the presidential vote in October. But the peso will probably slide further: “If you ask me if it reaches 100, well history says eventually it will,” he said.
The challenge for markets is deciphering Argentina’s policy direction under an Alberto Fernandez presidency. The opposition candidate said he doesn’t want to default on the nation’s bonds, although he blamed President Mauricio Macri for increasing short-term debt to unsustainable levels.
“Alberto already says Argentina would be in default if not for the IMF, so if he says ‘I won’t default,’ the market is skeptical,” Botto said.
On Monday, his team arrived into the office -- just blocks from the famous Teatro Colon opera house -- at about 8 a.m. They worked the phones all day, processing the unexpected political outcome while trying to calculate the proper value of local assets and relaying that to clients. Botto said he didn’t make it home until after 10 p.m. Then he washed down his wife’s homemade chicken and rice with cream with three glasses of Macallan 18 whiskey.
“The good stuff,” he said.
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