Highland Is Buying Lazard's Argentine Fund

  • Could double equity holdings to 40% on midterm elections
  • Portfolio may rise to as much as $500 million from $80 million

Highland Capital Management LP is buying an Argentine fund previously run by MBA Lazard and plans to expand the assets under management as the local stock market continues to reach records.

The Dallas-based asset manager will buy the $80 million fund formerly managed by MBA Lazard and increase the size to between $400 million and $500 million, according to a person with knowledge of the deal, who asked not to be named because it is private. Highland will wait for midterm elections in October before shifting the Argentine funds holdings to as much as 40 percent equity from 20 percent now, and keep the rest in fixed income, the person said. The former MBA Lazard fund is made up of institutional investors, mostly family offices, based in Europe, the person said.

Lazard, which had a 50-50 venture with MBA previously, purchased the remaining 50 percent in October. The fund which Highland is purchasing, was not included in that deal.

Andres Pitchon, the senior portfolio manager, and two more junior staffers in the former MBA Lazard fund will join Highland, the person said. The company manages about $9 billion in assets. Highland spokeswoman Lucy Bannon declined to comment.

Highland is setting up an office in Argentina as it bets that President Mauricio Macri’s Cambiemos coalition will do well enough in October mid-term elections to continue turning around the policies of former president Cristina Fernandez de Kirchner, which isolated the country from debt markets and discouraged foreign investment. Fernandez is running for a senate seat for Buenos Aires province.

Fernandez Return?

Despite the potential for Fernandez’s election and return to the presidency in 2019, Highland still sees value in Argentine stocks that are rated frontier by MSCI Inc., according to the person. Highland previously did business in Argentina during Fernandez’s administration in 2014, buying bonds due in 2033, which rallied ahead of Macri’s election in 2015.

Highland President and co-founder Jim Dondero said as recently as March 2016 he was interested in opening a fund in Argentina.

Argentina’s Merval Index has soared 33 percent this year to a record, while Brazil’s Bovespa has gained 5 percent.

The biggest risk is inflation, which is still far from the central bank’s target of 12 percent to 17 percent even after slowing from a high of 47 percent last year to about 24 percent in the first quarter. Argentina is also experiencing a choppy economic recovery after a recession, with consumer demand still falling. That hasn’t stopped debt investors, who oversubscribed for Argentina’s first ever 100-year bond last month.

(A previous version of this story incorrectly said that Highland was purchasing the fund from Lazard.)

— With assistance by Katia Porzecanski, and Daniel Cancel

(Corrects to say throughout that fund was owned by previous joint venture between MBA and Lazard.)
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