Chavez’s 681% Returns Mean Socialism Buoys Goldman: Andes Credit
By Ye Xie & Nathan Crooks - Jan 30, 2013 9:32 AM ET
Since taking office in 1999, Hugo Chavez has spread his socialist revolution in Venezuela by seizing more than 1,000 companies. For bondholders that stuck by him, he’s also delivered returns that are double the emerging- market average.
The 681 percent advance, equal to 14.7 percent annually, has enriched investors from OppenheimerFunds Inc. to Goldman Sachs Asset Management LP that counted on Chavez’s willingness to siphon the country’s oil wealth to pay its creditors in the face of start-stop growth and falling reserves. While his policies drove away enough investors to keep Venezuela’s borrowing costs over 12 percent on average during his tenure, or 4 percentage points higher than those of developing nations, he’s never missed a bond payment.
“This is a really great high-income and high-total-return investment for your portfolio,” said Sara Zervos, an emerging- market debt manager at New York-based OppenheimerFunds, which oversees $176 billion in assets and has invested in Venezuelan notes for more than a decade. “Chavez hasn’t done a lot of good for his country, but he has the objective to service the bonds. Our interests are aligned.”
Now, as the 58-year-old leader battles cancer, the nation’s outsized returns may be nearing an end. While Venezuela’s benchmark bonds have climbed to a five-year high since Chavez said on Dec. 8 that he needed more surgery, they’re unlikely to replicate the gains they’ve posted in the past decade once the rally drives yields down closer in line with regional peers, according to Russell Dallen, the head trader at Caracas Capital Markets.
more:
http://www.bloomberg.com/news/2013-01-30/chavez-s-681-bond-returns-buoy-goldman-andes-credit-correct-.html
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