By Philip Haddon | 13:44:23 | 09 June 2008
Europe's most consistent emerging bond manager, Sydinvest's Phillip
Blackwood, has been buying bonds from Cuba and thinks the country offers
'massive potential'. Meanwhile he singles out Venezuela and Nigeria as
other key plays.
Blackwood has gone off his benchmark to hold US dollar denominated debt
from Cuba in his portfolio. He thinks with a long term view investments
in the currently socialist country will pay off.
'Cuba is an area which we are very positive on,' he says. 'It is a
patience trade, it's not one that will go crazy in the near term, but we
believe it will pay off in the medium term. It has massive potential;
with the change in leadership we expect it to soften up and the US to
gradually remove sanctions, which will open up fantastic investment
opportunities.'
'But it depends on when Castro dies. After that I expect to see an
easing of tensions and a willingness to negotiate.' Blackwood says. 'We
don't expect a dramatic move, we expect things to go slowly.'
Another socialist country which is an important play for Blackwood is
Venezuela, which continues to benefit from a high oil price.
'We believe the market has overreacted in terms of the widening spread,'
he says. 'Venezuela has no problems paying the debt with the high oil
prices so why would they default? It would simply cost them too much
economically to default. If they defaulted investors would go after
their international cash flows; their oil money.'
He also continues to be positive about investing in Nigeria.
'Nigeria is an oil story, but it's an oil story where production is set
to increase,' he says. He thinks that despite question marks over
corruption and how democratic the government is, the reforms being
introduced are encouraging.
'We are seeing some very positive economic policies getting put in
place,' Blackwood says. 'It is a reform minded government.'
However, he has changed his exposure to Nigeria to shorter duration
bonds as he is cautious about interest rates because of inflationary risks.
Citywire last week named Blackwood Europe's most consistent emerging
market bonds manager because he is the only one who has beaten the
sector's average manager for each of the last five years.
He only invests in sovereign debt, avoiding corporates, and puts his
performance down to having faith in his process and standing by his
investments.
'You must have a well defined investment process and know what you are
looking for,' he says.
'You should not be pulled in different directions by external factors
such as sales people with their tips of the day. It's about sticking to
your process and having belief in your investments. A manager should be
putting his money where his mouth is when he finds an investment he wants.'
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