Michael Hasenstab rose to prominence following the financial crisis thanks to bold investments in struggling countries like Hungary, Ireland and Nigeria. utube.com
Michael Hasenstab rose to prominence following the financial crisis thanks to bold investments in struggling countries like Hungary, Ireland and Nigeria. utube.com
Bond funds run by Michael Hasenstab, one of the fixed income market's biggest investors, lost nearly US$1.8 billion in a single day during the stampede out of Argentine assets that followed the drubbing of President Mauricio Macri in the weekend primary elections.
Mr Hasenstab, the star manager at California-based FranklinTempleton, has been one of the biggest buyers of Argentine debt, and six of his funds with the most significant exposure to the country suffered large drops in value in Monday's rout, according to Financial Times calculations.
Concerns of a return to populist Peronist rule after the presidential election proper in October sent the peso down more than 20 per cent versus the dollar at one point and the yield on Argentina's shorter-dated bonds surging to distressed levels. The odds of a debt default in the next five years also spiralled to 75 per cent.
The Argentine turmoil both reflected and added to wider turbulence in emerging market currencies and bonds, which lost over 1 per cent on Monday, exacerbating the losses suffered by several Franklin Templeton funds.
Mr Hasenstab's $11.3b Templeton Emerging Markets Bond Fund, which has an exposure to Argentine debt of more than 10 per cent, according to Morningstar, fell 3.5 per cent on Monday, indicating a loss of about $400m.
The $17.4b Templeton Global Total Return Fund Class A saw a decline of 2.5 per cent. That fund, which has just over 6 per cent exposure to Argentina's fixed income market, according to Morningstar, lost approximately $440m.
Mr Hasenstab's $33.1b Templeton Global Bond Fund shed 1.8 per cent, leading to losses of roughly $592m. Three of the other funds he co-manages with notable exposure to Argentine debt saw losses totalling just under $362m.
The FT's calculations are based on asset-under-management figures and portfolio weightings as of July 31. Franklin Templeton declined to comment.
Chaos gripped Argentine markets on Monday after a stronger-than-expected electoral showing by Peronist candidate Alberto Fernández and his running mate, former president Cristina Fernández de Kirchner. It continued on Tuesday, although to a smaller magnitude, amassing even more losses for investors.
Argentine markets slumped following the drubbing of President Mauricio Macri in the weekend primary elections. AP
Franklin Templeton was not alone in getting hit by the market rout. According to JPMorgan, "overweight Argentina" was one of the most crowded trades among investors as of the end of last month.
Funds managed by London-based Ashmore Group and investment giant Fidelity suffered sizeable losses as well. Other top holders of Argentina's dollar-denominated debt include BlackRock, T Rowe Price and Pimco, according to data compiled by Bloomberg.
Mr Hasenstab rose to prominence following the financial crisis thanks to big, bold investments in struggling countries like Hungary, Ireland and Nigeria, placing sometimes multibillion-dollar bets that they would turn their economies round.
These unusually aggressive bets for a bond investor turned into money-spinners and catapulted the softly-spoken, cerebral fund manager into the upper echelons of the investment industry. Mr Hasenstab's flagship fund, the Templeton Global Bond Fund, returned an eye-popping 16.2 per cent in 2012 and its assets under management rose to a peak of $73b in 2014.
However, premature wagers that interest rates would creep higher and deflate the post-crisis bond market rally have also weighed on the fund's performance. Assets under management for the Global Bond Fund have more than halved, and it has returned just 1.5 per cent over the past five years.
Franklin Templeton suffered $11.7b in outflows from its mutual funds in the first half of the year, extending an enduring pattern that sapped $44.6bn in assets last year, as investors favoured low-cost index funds over its actively managed mutual funds.
Written by: Colby Smith in New York and Robin Wigglesworth in Oslo
