Franklin Templeton buys $2.25bn in Argentine bonds

Michael Hasenstab-led investor made billions on crisis-era Irish debt

Michael Hasenstab, the chief investment officer of Franklin Templeton’s global macro team

Michael Hasenstab, the chief investment officer of Franklin Templeton’s global macro team

 

Franklin Templeton’s Michael Hasenstab came to Argentina’s aid this week, lending Buenos Aires more than $2.25 billion (€1.9 billion) in a discrete cash infusion reminiscent of the bond fund manager’s support for the Republic in the wake of the euro zone crisis.

Funds controlled by Mr Hasenstab, including the flagship $38 billion Templeton Global Bond Fund, snapped up more than three-quarters of the 73 billion pesos ($3 billion) in “Bote” bonds sold by Argentina on Tuesday, according to people familiar with the matter.

The Argentine government only “reopened” the Bote bonds maturing in five and eight years for a sale after being approached by Franklin Templeton, which was already a big Argentine bondholder, according to a source close to the deal.

Argentina had found itself on the ropes this year, with a change to its inflation target and a central bank rate cut earlier this year denting confidence in the reformist government led by president Mauricio Macri. That has sent the country’s currency tumbling to a record low against the dollar.

Last week, the government approached the International Monetary Fund for a rescue package. The $3 billion Bote sale arranged by Franklin Templeton represents a vote of confidence in Argentina while the country works towards an agreement with the IMF.

“You can’t get a bigger sign of confidence from markets when you place a bond in pesos at a fixed-rate on one of the worst days in emerging markets this year,” Luis Caputo, Argentina’s finance minister said on Tuesday, according to Bloomberg. “It is a sign of confidence in President Macri, and the policies he is putting in place.”

Mr Hasenstab, the chief investment officer of Franklin Templeton’s global macro team, has earned a reputation for placing big bets on countries in economic and financial distress, such as Hungary in the wake of the financial crisis, the State at the depths of the euro zone crisis, and Ukraine around the time of its revolution. He reportedly made a €5.6 billion return on the Irish investment.

Countries in trouble

“Michael Hasenstab is known for making big investments in countries in trouble,” said Bartosz Pawlowski, chief investment officer at mBank Private Banking in Poland, and former head of emerging markets strategy at BNP Paribas.

“This high concentration strategy is a feature of his approach, but of course it requires excellent grasp of not only the macroeconomic situation but also the political decisions being taken by authorities.”

While Franklin Templeton declined to comment on the Bote sale, Mr Hasenstab said in a statement: “The current government continues to demonstrate incredible resolve and skill in giving life back to an economy that had all but collapsed.”

He added: “Over the last months some policy errors did occur, as is common in any reform effort as large as is currently being undertaken. Importantly, errors were recognised and reversed and we remain confident the right policies are in place to improve the economy, (the) welfare of Argentines and the markets.” – Copyright The Financial Times Limited 2018