Pioneer’s Syzdykov ‘bruised’ by bullish Argentina stance

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Emerging market star Yerlan Syzdykov has been ‘bruised’ by his bullish stance on Argentinian debt at the beginning of the year but sees no reasons to give up on the complex country.

The Euro Stars AAA-rated manager (pictured) had made Argentinian debt the biggest position in his €728 million Pioneer Funds Emerging Market Bond fund earlier this year but has gradually reduced this in the intervening periods.

Syzdykov, who co-manages the fund with fellow Euro Stars AAA-rated manager Greg Saichin, told Citywire Global he had been bullish on the country’s outlook as he anticipated a more orthodox policy route but this did not come to fruition.

‘Argentina has been a disaster this year for investors and given the fact that I had a bullish stance on the country at the beginning of the year has made it a very bruising conviction trade for us.’

‘When we spoke previously, I had just returned from a trip to Argentina and I was very bullish because we expected a bit more orthodoxy in policies and that has not turned out to be what happened.’

This is in response to some major developments in the country, such as the nationalisation of oil giant Repsol and the hold-outs over debt restructuring, which Syzdykov says may have turned off many investors.

‘Obviously we have seen big ticket resources nationalised, what with the YPF/Repsol incident, and something quite different with the hold outs and the drama that is going to continue to play out into next year,’ he said.

Exposure

Syzdykov has cut his exposure in Argentine debt to almost half of where it was in February – going from 9.8% to 4.8% over the past 10 months – but he said he sees no reason to cut this further.

‘We will continue holding our position from now going into the New Year. Simply because I think the price action has been overdone because it appears to be attractive from a fundamental basis despite the fact we have seen a drastic change of environment since the beginning of last year.’

‘However, I think this situation will present opportunities in the short term. Spreads are quite tight right now and I think we will see investors coming back, apprehensively coming back, into it next year on a short term basis.’

One of the key elements which Syzdykov said needs to be addressed in order to better the picture is a change of policy mix.

This is due to contentious issues of the nationalisation of YPF and the on-going dispute with hedge funds over the outstanding money owed following 2001’s sovereign default and debt restructuring.

‘I think we need to see a change of policy, as the government plans to get private investment into the oil and gas sector has not been taken up.'

'I am positive on the country because I think it just needs good management, it has the resources and capabilities but it is about getting the right policies.’

The Pioneer Emerging Markets Bond fund has returned 43.63% over the past three years. This compares to its Citywire benchmark, the JP Morgan EMBI +, which rose 42.24% over the same period.