Cuban Bonds, Anyone? Berlin Investor Goes Extreme to Beat Peers

  • Landesbank investor has bond portfolio spanning 64 countries
  • Strategy helps protect against surge in currency volatility

Lutz Roehmeyer is pushing the idea of a global bond fund to the extreme. And it’s paying off.

In the past four months, the money manager at Landesbank Berlin Investment GmbH who oversees 1.2 billion euros ($1.3 billion) has added 45 new bonds to his Weltzins-Invest fund. That’s increased the number of countries he invests in to 64, more than four times the nations included in the JPMorgan Chase & Co. index he tracks.

His strategy to spread holdings across dozens of markets has helped his fund outperform all of its peers on a five-year basis after adjusting for price swings, according to data compiled by Bloomberg. It’s also protected it against extreme market moves that drove developing-nation currency volatility to a four-year high last month. He now holds bonds from countries including Armenia and Zambia and is considering investing in Cuba and Iran.

“What we see right now is that we have huge volatility,” Roehmeyer said. “So we are trying to diversify even more. We are trying to add more and more countries.”

Roehmeyer’s strategy has its pitfalls. His fund has trailed 75 percent of its peers in the past month after diversification limited the benefit from a 20 percent rally in Brazilian local-currency debt and a 9.5 percent jump in the real. In contrast, Franklin Templeton’s $55 billion Global Bond Fund, which counts Brazil as its third-biggest holding, outperformed 85 percent of its counterparts in the period.

Buy-and-Hold

Roehmeyer’s portfolio of bonds in developed, emerging and frontier markets and is the third-biggest publicly-listed holder of Bosnian sovereign bonds, according to data compiled by Bloomberg.

“We like Bosnia, Macedonia, Montenegro fundamentally,” Roehmeyer said. “We like to invest in places where no one else is invested because then we are safer in terms of volatility. It pays off to look at these smaller countries because you end up with a better risk-return ratio.”

Roehmeyer said he focuses on sovereigns, quasi-sovereigns or supranational-agency bonds, buying securities with maturities averaging three years and holding them until they come due.

As emerging-market volatility climbed last year amid China’s devaluation and tumbling commodity prices, Roehmeyer ventured into new countries and now he’s eyeing Malawi and Gambia, as well as market openings in countries like Iran and Cuba.

“Whenever a capital market opens up, it makes sense for us to look at it,” he said. “The trend is do even more diversification.”

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