Banchile’s asset management arm has launched a fund that will invest in a Schroders’ Argentina debt vehicle on the back of a positive macro outlook for Latin America’s second-largest economy.
The Banchile Fondo de Inversión Deuda Argentina, a Chile-domiciled investment fund launched December 6 and available to local clients, will invest in the Schroder Retorno Total Dos, a vehicle the UK firm runs from its office in Argentina.
Managed by Pablo Albina, the Schroders fund can buy both corporates and sovereigns. However, according to a fact sheet, as of November 30 the fund was fully invested in Lebacs, or short-term debt instruments issued by Argentina’s central bank in local currency.
Banchile decided to invest in the Schroders fund because it offers access to the high-yielding Lebacs, as investors can only access them through the Argentine market and not through international exchanges, said Banchile's fund distribution manager Juan Pablo Cerda.
‘Today these instruments trade at annual rates close to 29%, with low credit risk and duration no longer than 260 days. Therefore, it’s an attractive return in Argentine pesos with low issuer risk,’ Cerda said.
‘We think the investment opportunity is there, among other things, because it's difficult for international investors to access Lebacs, unlike other products listed in international markets.’
John Zalles, who runs Banchile’s Latin American debt funds, will be in charge of overseeing the new vehicle.
The fund is geared toward high net worth individuals, as it carries a minimum investment of $150,000. Investors buying into the fund through Banchile's brokerage, which acts as a market maker, don't have a minimum investment.
Overall, Banchile sees investment opportunities in Argentina as the country implements reforms in the economic, political and capital markets arena, Cerda said.
Since getting elected in 2015, Argentine president Mauricio Macri has removed capital controls, opened the country up to international markets and allowed local bankers to advise on onshore and offshore assets.
The fund launch comes as Argentina works through a tax reform project that market observers see as instrumental to the country's continued growth.
Among other changes, the government has proposed to tax individuals at 15% on income from foreign currency or indexed instruments and 5% on inflows from debt assets denominated in local currency, with a floor to protect small investors.