Sustainable investing giant defends Venezuelan debt holdings

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An asset manager that is a big proponent of responsible investing argues Venezuelan holdings in its $2.3bn emerging markets fund are not controversial “hunger bonds” as the Latin American emerging market moves to restructure its debt.

Candriam markets itself as a responsible asset manager and holds a quarter of its €111bn assets in dedicated SRI funds.

The Candriam Bonds Emerging Markets fund, which does not have an SRI mandate, has 2.6 per cent allocated to Venezuela, according to FE data.

SRI products do not hold any Venezuelan debt, a spokesman confirms.

The spokesman says none of Candriam’s EM debt funds hold any of the “so-called ‘hunger bonds'” purchased by Goldman Sachs Asset Management in May at a deep discount.

Venezuelan debt has been labelled “hunger bonds” as the government focuses on repaying foreign creditors as its population goes hungry. Opposition politicians argue GSAM provided a financial lifeline for Nicolas Maduro’s regime through its purchase of state-owned oil company debt.

Candriam Bonds Emerging Markets fund managers Diliana Deltcheva, Helena Clijsters and Magda Branet have recently added to Venezuela on the basis that bonds currently trade below recovery values.

The spokesman for Candriam, which is owned by New York Life Investments, says the fund’s exposure is small relative to the JPM EMBI Global Diversified benchmark.

PDVSA is among the Bonds Emerging Market fund’s largest positions with 1.3 per cent allocated to an issue maturing in 2020.

Debt restructuring

President Maduro announced on Thursday that the country was restructuring its approximately $100bn debt, unsettling bond markets.

Venezuela’s sovereign rating pushed further into junk status as a result of US sanctions issued in July with Fitch downgrading it to CC. It is the highest yielding constituent of the JPMorgan index and currently faces its fourth year of economic contraction.

Within Investment Association funds, the Old Mutual Emerging Market Debt, GS Emerging Markets Debt and L&G Emerging Markets Government Bond (US$) Index funds have the largest exposures to Venezuela with 5 per cent, 4.3 per cent and 3.4 per cent respectively.

OMGI and GSAM did not respond to requests for comment from Fund Strategy.

Investors have been piling into the L&G tracker fund, which is among the most popular funds in the sector over the last 12 months and tracks the JPMorgan Emerging Market Debt Plus index.

LGIM has said a debt restructure or default would not necessarily result in Venezuela being removed from the JPMorgan Emerging Market Debt Plus index it tracks.

Goldman Sachs has 10 funds within the IA universe with exposure to Venezuela.