Where others fear to tread The controversial BOND strategy of a bargain-hunting bond trader. Returns are due solely to macroeconomic insight.

The best time to invest was “the point of maximum pessimism”

Since 2010, he has been investing enthusiastically in Ukrainian government debt, and now owns $8.8 billion of the country’s $16 billion of international bonds

Such bets can be lucrative. Over the course of 2011 Mr Hasenstab spent over $11 billion on Irish government bonds. The country had been downgraded to junk status amid fears of default; panicked investors were dumping their bonds, allowing Mr Hasenstab to buy at yields as high as 14%. Ireland’s skilled workers and lack of Greek-style civil unrest, he thought, would stand the country in good stead in the long run. And so they did: within 18 months he had earned well over a 50% return.

Mr Hasenstab argues that, with interest rates likely to start rising after a 30-year bull run in government debt, the only way to make money in bond markets will be to find other countries that the market is mispricing. So his international research team of 20, many of them with doctorates in economics, searches constantly for out-of-favour countries with hidden promise. They mostly ignore indices, benchmarks, ratings agencies and newspapers, focusing instead on data and first-hand research. Mr Hasenstab himself has visited 25 countries this year. Taking a long view is an essential part of the strategy: he asks investors to judge his performance over a minimum of three years.

Mr Hasenstab says of the IMF: “Their presence or lack of presence does not solely direct our investments.” His funds’ success does not hinge on a Ukrainian bail-out: his investments there make up only 4.5% of their holdings. He points out that he has done well in lots of places where the IMF was not involved at the time, including Hungary, Indonesia, Lithuania, Mexico and South Korea, and that he has avoided places where bail-outs seemed inevitable, such as Greece



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