Argentina is an amazing country. It should be one of those emerging countries that helps fuel the global economy. Argentina has all the ingredients to make that happen, but for decades the country has been its own economic enemy. Years of Peronist type government controls turned the country into a debt ridden lump of empty promises and missed loan payments. According to CEO James Dondero, Argentina was off limits to hedge funds except for two that lost their shirt buying Argentinian bonds.
Dondero is a well-respected hedge fund investor that has more than 30 years of experience in the investment industry. He founded Highland Capital Management with Mark Okada in 1992, and almost immediately, the men developed an impressive portfolio. Today, Highland Capital manages more than $19 billion in assets in the technology, energy, healthcare and consumer driven sectors of the investment industry. Dondero is considered an expert in analyzing the intricacies that exist in foreign markets, and his knowledge has made Highland Capital’s Global Funds very successful.
Bloomberg.com published an article about Highland Capital recently that highlighted Dondero’s decision to invest in Argentina’s debt. Investing in Argentina was a new venture for Highland Capital in 2014, but the company decided the risk was worth it. The old government was crumbling, and Dondero wanted to get in on the ground floor of a new administration. When Mauricio Marci was named president in 2015, Dondero realized that Argentina finally had a chance to show the world its economic talents if the new president could restructure the debt that plagued the country for years.
President Marci didn’t waste any time. He restructured the old debt by issuing new bonds with attractive yields. He also announced a $12 billion bond program that would begin in April 2016. Dondero was one of the first hedge fund managers to opt into that program, and not in a small way. Highland Capital is allocating a large portion of its Global funds to the Argentina bond program. Marci also made some important internal changes that will help the country get out the recession that has taken a toll on the entire population.
Some outsiders say Argentina is moving too fast, and should wait and see if Macri’s changes and bond proposal works. But investors like James Dondero already sees signs that Argentina is going to pull out of their economic contraction mode and be an important part of the global economy.