First State EMD chief reverses Argentinian offload

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First State’s head of emerging market debt has begun to add Argentinian exposure back to her two funds after selling out of all holdings at the start of the year.

Citywire AA-rated manager Helene Williamson cut all Argentine bonds in January owing to concerns over the currency.

Emerging market managers have given Argentina a wide berth since the country moved to aggressively devalue its currency against the US dollar at the start of the year.

Taking a similar approach, Williamson saw all exposure, which amounted to just under 2% of her two funds, being removed. However, Williamson told Citywire Global she has begun to reinvest.

‘We sold during January our entire Argentina position given expensive valuations. We bought these Argentine bonds back at cheaper levels at the start of February,’ she said.

‘Argentine bonds sold off aggressively in January because the Central Bank devalued the peso after considerable losses in international reserves.’

In both funds, Williamson has kept an underweight in duration compared to the benchmark, which is most obviously expressed through her Latin America exposure.

‘We believe that risk premiums are not compensating us enough for a more volatile interest rate environment and heightened primary market activity,’ she said in an investor note.

The First State Emerging Markets Bond fund has 31.9% exposed to the European market, while having 19.7% in Latin America, which is almost half of the benchmark allocation.

This 90-position fund is primarily invested in the government debt market, which, according to the January 2014 factsheet, makes up 80% of the fund’s sector exposure.

The Dublin-domiciled version of this fund has lost 4.55% over the 12 months to the end of January 2014, which compares with a fall of 7.88% by the JP Morgan EMBI +, its Citywire benchmark, over the same timeframe.