Argentina market rout pummels Brazilian hedge fund
Newfoundland Capital Management, based in Sao Paulo, was hit with a loss on paper of around $55 million, as its bets on four Argentine companies in agribusiness, natural gas, energy distribution and telecommunications imploded.
According to regulatory filings, just over 50% of Newfoundland’s portfolio is split in New York- and Buenos Aires-traded shares of agribusiness Cresud (CRESY.O)(CRES.BA), stocks that fell on Monday 38% and 25%, respectively.
U.S.-traded shares of electricity distributor Edenor (EDN.N), which plummeted 59% on Monday, amount to over 16% of Newfoundland’s portfolio.
The one-day paper losses in those two companies alone amount to nearly $50 million. The remaining loss comes from Newfoundland’s exposure to Telecom Argentina ADRs (TEO.N), which was down 33% on Monday, and Transportadora de Gas del Sur (TGS.N), which fell 48%.
The most recent regulatory filings, from last May, list holdings as of March 31. Newfoundland did not return calls or emails seeking comment or confirmation of any material change in its positions since. The Argentine local filing in Cresud shares is as of June 2018.
Previous filings show the fund has mostly been building up its positions in the ADRs since at least mid-2018. In the case of Nasdaq-traded Cresud shares, a position of 1.5 million shares from the third quarter of 2017 has grown in every quarter but one since, and was built up to 5.8 million shares.
Four of the five stocks in Newfoundland’s portfolio that tumbled on Monday were up between 0.8% and 8.8% each on Tuesday, while Edenor was down another 3.5%.
Disclosure of stock holdings as of the end of June, including Argentine ADRs, are due to the U.S. Securities and Exchange Commission this week. The filings will show how exposed these and other funds were as of June.
Current filings show billionaire investor David Martinez’s Fintech Telecom LLC held 30.8% of Telecom Argentina as of mid-April. That position would have suffered a one-day loss of over $132 million on Monday.
Large bond holders also figure among those seeing losses from Monday. Franklin Templeton’s flagship $33 billion Global Bond Fund (TPINX.O), which has 3.64% in Argentina and is overseen by Michael Hasenstab, was down 1.79% on Monday alone -the worst performing fund in its category, according to Morningstar data.
Monday’s market rout in Argentina followed results from a primary election that dealt a blow to market-friendly president Mauricio Macri’s re-election chances in October. Argentina’s peso and dollar-denominated bonds fell again on Tuesday.