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Argie Bond Quant Portfolio 

TRACK RECORD MARZO

Argie Bond Quant Portfolio busca estar siempre del lado barato del mercado. Es una estrategia que invierte activamente en bonos soberanos argentinos detectando aquellos que cotizan baratos en relación a lo que indica el equilibrio del mercado.

En la jerga se dice que hay bonos en “cuatro monedas”: en Dólares, en Pesos sin ajuste, en Pesos con ajuste por tasa BADLAR (tasa de plazo fijo a 30 días por más de 1 millón) y en Pesos con ajuste CER (inflación minorista).

En todo momento calculamos la curva cero cupón en cada moneda y valuamos cada bono. Este ejercicio, combinado con años de historia nos permite detectar cuando un bono está lo suficientemente barato en relación a su precio justo para comprarlo, cuando su precio se ha normalizado para venderlo, y cuando está lo suficientemente caro para mantenernos totalmente alejados de él.

El resultado es un portfolio dinámico que busca generar retornos anuales de dos dígitos con una correlación acotada y baja volatilidad.

TRACK RECORD

BROCHURE

(Fuente:  GREEK PSI 2 Valuation and timeline, Barclays Capital, 24 February 2012)

Greece GDP-linked securities are bound to be less valuable than the Argentinean ones

As a final discussion to our valuation analysis, we present a comparison between the Argentina and Greece GDP-linked security. As discussed, the Greek GDP-linked securities ceteris paribus are bound to be much less valuable than in the Argentinean case.

Argentina GDP-linked securities were issued in 2005 as part of the Republic debt restructuring proposal following the country default in 2001. The warrants were given as a sweetener to investors and were initially attached to the new bonds trading separately 180 days after the restructuring was completed. These instruments are inflation-linked local currency denominated (Argentinean peso) yet trade and settle in currencies of the original debt restructured (USD, EUR, JPY and ARS).

The main difference between the Argentina and Greece GDP-linked warrants is the determination of the payments: floating inflation-linked in the case of Argentina versus fixed nominal for Greece. The Argentine GDP-linked warrants make payments related to GDP performance and indexed to inflation in each year over the life of the instrument. On the contrary, the Greek warrant payments will only be a nominal 1% of the face value provided that a condition on GDP growth is met¹. This has important implications; in the case of the Argentinean warrant, the cash flows could be front loaded (as they actually have been given the strong nominal GDP performance). Furthermore, in the Argentine case, if a payment is not ‘triggered’ in a certain year, the payment would be pushed further out the stream of payments. On the contrary, in the Greek warrant, the missed payment would be lost.

In the Argentina warrant, given the structure of the payment, a total cap was introduced equal to 48% of the face value of the instrument. That means that Argentina will not pay more than 48% of the notional value in each currency². As a comparison for Greece, an equivalent total payment could be a maximum 28% of the face value of the warrant (ie, assuming that 1% is paid every year from 2015), hence much smaller. Finally, the warrant face value of Argentina is higher than Greece (33.3% vs 31.5%) given the higher notional haircut on the Greek risk. In conclusion, the value of the Greek GDP-linked securities ceterisparibus is bound to be much lower than in the Argentinean case.

As we discussed in the section above, the average theoretical value of the GDP warrant in Greece assuming a nominal discount factor of 12% is around 1point. In comparison, when the Argentina GDP warrant was issued in 2005 it started to trade at a price of approximately 5 points. The EUR denominated warrant traded as high at 15 points and has paid so far a total coupon equal to 11 points. For the Greece GDP-linked warrant – even assuming the discount factor equal to zero – the maximum value would be around 8.8 points.

1 The conditions that have to be met to trigger the GDP-linked payment are not yet specified in the current documentation

2 Note that the payments on the Argentina warrants are in local currency (pesos), while the cap is denominated in the currency of the warrant (USD, EUR, JPY and ARS); this may introduce complication in the valuation.

(Fuente:  GREEK PSI 2 Valuation and timeline, Barclays Capital, 24 February 2012)

(Fuente: Greek PSI: Questions & Answers, BNP Paribas, 22 February 2012)

(Fuente: Greek rescue wobbles, Central bank outlook, Standard Chartered Research, 17 February 2012)