(Bloomberg) — Gramercy Funds Management Inc. is turning to debt from emerging market borrowers’ top-rated borrowers as bonds from the world’s riskiest countries become less attractive.
Most read articles on Bloomberg
“The days of easy money in high-yield bonds are over,” said Robert Koenigsberger, founder and chief investment officer of the Greenwich, Conn.-based investment management firm. “We’re moving away from high-yield bonds to investment-grade bonds, reducing credit risk and extending duration.”
Mr. Koenigsberger has invested in emerging markets for more than three decades, founding Gramercy in 1998. He has been taking advantage of a surge since last year in the dollar notes of Argentina, Sri Lanka and Pakistan, whose sovereign debt has been supported mainly by stimulus packages and loan agreements with multilateral lenders.
An index of emerging-market, high-yield, hard-currency bonds has given investors a 7.4% gain this year, compared with a 1.5% gain for a benchmark investment-grade bond, according to data compiled by Bloomberg.
Gramercy now favors BBB-rated sovereign debt over lower-rated and corporate bonds, and is buying up bonds from the Middle East, Panama and elsewhere. The firm, which manages more than $6 billion in assets, also has investments in private loans in Turkey and Mexico, Mr. Koenigsberger said in an interview.
Even after the rally in high-yield bonds, Koenigsberger said on Bloomberg TV on Tuesday that countries with right-wing leaders such as El Salvador and Argentina could benefit if Donald Trump wins the U.S. presidential election in November.
In Mexico’s private lending sector, he sees opportunities for real estate, ancillary services and logistics companies. Gramercy, for example, lends to suppliers to state-run oil giant Petroleos Mexicanos.
“If you’re more concerned about credit risk and less concerned about interest rate risk, you’re going to move toward the idea of investment-grade bonds in the public sector and highly structured collateral in the private sector,” Koenigsberger said.
Most read articles on Bloomberg Businessweek
©2024 Bloomberg LP