(Bloomberg) -- Gramercy Funds Management is turning to debt from top-rated borrowers in emerging markets as bonds from some of the riskiest countries in the world look less appealing.
“The easy money in high-yield is gone,” said Robert Koenigsberger, founder and chief investment officer of the Greenwich, Connecticut-based investment management firm. “We’ve been moving away from high-yield toward investment-grade names, reducing our credit risk and picking up duration.”
Koenigsberger, who has invested in emerging markets for more than three decades and set up Gramercy in 1998, rode the rally that sent dollar notes from the likes of Argentina, Sri Lanka and Pakistan soaring since last year. These credits have been largely supported by economic measures and funding agreements with multilateral lenders.
An index of emerging-market hard-currency, high-yield notes has handed investors a 7.4% gain year to date, compared to a 1.5% return for a gauge of investment-grade debt, data compiled by Bloomberg show.
Now, Gramercy is favoring BBB rated sovereign debt over lower-rated and corporate bonds, snapping up notes from places including the Middle East and Panama. The firm, which manages a little over $6 billion, also has exposure in private lending in Turkey and Mexico, Koenigsberger said in an interview.
Even after the high-yield rally, countries with right-wing leaders, such as El Salvador and Argentina, might benefit if Donald Trump wins the US election in November, Koenigsberger said on Bloomberg TV Tuesday.
In the private-lending space in Mexico, he sees opportunities in real estate, ancillary services and logistics names. For instance, Gramercy has been lending to suppliers of state-run oil giant Petroleos Mexicanos.
“If you’re more worried about credit risk and less worried about interest-rate risk, then you’re going toward investment grade on the public side and highly-structured-collateral ideas on the private side,” Koenigsberger said.
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