Hedge Funds From Autonomy to Odey Tumble on Argentine Swoon

(Bloomberg) -- Big hedge funds thought they could maneuver through the minefields of Argentine politics. Instead, they got clobbered.

Autonomy Capital and VR Capital Group saw their gains for the year wiped away after starting August with wagers on the South American nation. Famed short seller Crispin Odey and Glen Point Capital also saw losses.

Market-friendly President Mauricio Macri shocked investors with his poor showing in the nation’s Aug. 11 primary elections. That sent Argentina’s stocks, bonds and currency into a tailspin. The results have fueled concern that opposition candidate Alberto Fernandez and his running mate, former President Cristina Fernandez de Kirchner, will bring back protectionist policies and restructure the nation’s debt.

Robert Gibbins’s Autonomy Capital lost about 16% in the first half of August, people familiar with the matter said. Gibbins, who manages about $6 billion, said in April that he expected voters to elect a market-friendly candidate in October. His fund had been up 7% through July.

In a call with investors last week, Gibbins said that while markets have rightfully priced a Fernandez victory, they’ve wrongfully priced a default on external debt, according to a person with knowledge of the call. Gibbins said he doesn’t think that’s likely.

More Losses

VR Capital also took a big hit. Its flagship fund lost 14.5% this month through Aug. 16, according to people with knowledge of the returns. The fund had been up 10.3% through July. VR Capital, which specializes in distressed and event-driven or special-situation investments, oversaw about $4.8 billion as of the end of February, according to regulatory filings.

Glen Point, a London-based macro hedge fund that invests in assets including emerging markets, slid 4% in the first half of the month in part due to Argentine wagers, said people familiar. Meanwhile, Zach Schreiber’s PointState Capital lost about 3%, paring his gains for the year to about 5%. PointState was the largest institutional holder of U.S.-traded shares of Pampa Energia SA as of June 30, according to regulatory filings. 

Odey Asset Management also suffered losses in its flagship Odey European Inc. fund. The $900 million fund counts Buenos Aires-based Banco Macro SA as one of its top 10 holdings.

“It was very painful to watch 8% of one’s valuation destroyed in an instant,” the hedge fund manager wrote in an investor update seen by Bloomberg. Odey questioned how much more money he could lose after the peso tumbled to a record low of 60 per dollar. His fund was already down 0.6% in the first seven months of the year, the update showed.

Light Sky, BlueBay

Some managers escaped the bloodbath. Ben Melkman’s Light Sky Macro, which manages $1 billion, started exiting positions in its $100 million Argentina-focused fund between February and July, according to a person with knowledge of the matter. Melkman, a former Brevan Howard Asset Management partner, decided to close the fund on July 31 due to election risk.

Melkman, who notched gains betting on Argentina in the first quarter, told investors that he “reduced risk and took stock” because “highly contentious elections in EM countries typically coincide with increased volatility, populist rhetoric and loose fiscal policy,” according to a second-quarter letter seen by Bloomberg. His main fund is up about 12% this year. 

BlueBay Asset Management also ditched its Argentina holdings ahead of the primary election, a spokeswoman confirmed. Money manager Graham Stock said the firm de-risked Argentine exposures in recent weeks after a trip to Buenos Aires in July. “The tail risks were so great that we had to go into the event flat risk,” he said.

Odey, who said the selloff created buying opportunities, warned that Macri may have a tough time gaining enough support to win in October.

“Macri has around three months to bring round that 33% which he failed to convince,” Odey said of the primary election results. “But I think he has the charisma of Theresa May. The only lucky thing is that I cannot understand a word that he says.”

Representatives for the firms declined to comment.

To contact the reporters on this story: Katia Porzecanski in New York at kporzecansk1@bloomberg.net;Nishant Kumar in London at nkumar173@bloomberg.net

To contact the editors responsible for this story: Alan Mirabella at amirabella@bloomberg.net, Melissa Karsh, Vincent Bielski

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