Argentina's Best Equity Managers Shunned Local Stocks This Year

(Bloomberg) -- The best strategy for Argentine stock pickers this year was to avoid Argentina.

The top four equity funds in the country all had one thing in common: a mandate to invest the bulk of their money overseas. That allowed them to dodge the world’s worst meltdown in stocks, which saw the benchmark Merval Index fall more than 50 percent this year in dollar terms. The top performer, ICBC’s Alpha Mercosur fund, had more than 99 percent of its capital in Brazil.

Argentine assets are some of the worst performers in 2018 amid concern about a growing budget deficit, double-digit inflation and a shrinking economy. While President Mauricio Macri has slowed the bleeding after tapping the International Monetary Fund for a record loan, equities trading has slowed, businesses are re-evaluating plans to expand in the country and everyday Argentines have seen their savings evaporate as annual consumer-price increases approach 50 percent after the peso lost more than half its value.

And to be clear, it isn’t like any of the money managers -- even those who went abroad -- fared particularly well in 2018. Every single local stock fund is poised to end the year in the red when measured in dollar terms, with just the top four managing to eke out losses of less than 10 percent. A full three-fourths of the 40 funds tracked by Bloomberg lost more than 40 percent.

Wall Street is split on the outlook for Argentina’s beaten-down stocks. JPMorgan Chase & Co. analysts wrote in November that they’re not a buy yet. Citigroup Inc., on the other hand, says it’s “time to start positioning” ahead of what’s sure to be a better 2019 for South America’s second-largest economy.

Several of the top Argentine fund managers for this year are optimistic about what lies ahead. Santander Rio Asset Management’s Gonzalo Gibelli says Argentine stocks have reached a bottom and are in a recovery phase. Lautaro Veliz Espeche, the chief investment officer at BBVA Banco Frances SA, says his fund won the No.3 slot this year by buying Mexican stocks and shares in Brazil’s state-controlled oil company, Petroleo Brasileiro SA. Now, he’s moving toward an overweight position in Argentina on a bet its stocks are set for a recovery.

“Company valuations could be very attractive compared to some countries in the region,” he said.

--With assistance from William Spada and Shin Pei.

To contact the reporter on this story: Carolina Millan in Buenos Aires at cmillanronch@bloomberg.net

To contact the editors responsible for this story: Courtney Dentch at cdentch1@bloomberg.net, ;Jeremy Herron at jherron8@bloomberg.net, Brendan Walsh, Andres R. Martinez

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