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Emerging market bond guru was big loser from Argentina’s market slump

Bond funds run by Michael Hasenstab, one of the fixed income market’s biggest investors, lost nearly $1.8bn in a single day during the stampede out of Argentine assets that followed the drubbing of President Mauricio Macri in this past weekend’s primary elections.

Mr Hasenstab, the star manager at California-based Franklin Templeton, has been one of the biggest buyers of Argentine debt, and six of his funds with the most significant exposure to the country suffered large drops in value in Monday’s rout, according to Financial Times calculations.

Concerns of a return to populist Peronist rule after the presidential election proper in October sent the peso down more than 20 per cent versus the dollar at one point and the yield on Argentina’s shorter-dated bonds surging to distressed levels. The odds of a debt default in the next five years also spiralled to 75 per cent.

Mr Hasenstab’s $11.3bn Templeton Emerging Markets Bond Fund, which has an exposure to Argentine debt of more than 10 per cent according to Morningstar, fell 3.5 per cent on Monday, indicating a loss of about $400m.

The $17.4bn Templeton Global Total Return Fund Class A saw a decline of 2.5 per cent. That fund, which has just over 6 per cent exposure to Argentina’s fixed income market per Morningstar, lost approximately $440m.

Mr Hasenstab’s $33.1bn Templeton Global Bond Fund shed 1.8 per cent, leading to losses of roughly $592m. Three of the other funds he co-manages with notable exposure to Argentine debt saw losses totalling just under $362m.

The FT’s calculations are based on asset-under-management figures and portfolio weightings as of July 31. Franklin Templeton declined to comment.

Chaos gripped Argentine markets on Monday after a stronger-than-expected electoral showing by Peronist candidate Alberto Fernández and his running mate, former president Cristina Fernández de Kirchner. It continued on Tuesday — although to a smaller magnitude — amassing even more losses for investors.

Franklin Templeton was not alone in getting hit by the market rout. According to JPMorgan, “overweight Argentina” was one of the most crowded trades among investors as of the end of last month. 

Funds managed by London-based Ashmore Group and investment giant Fidelity suffered sizeable losses as well. Other top holders of Argentina’s dollar-denominated debt include BlackRock, T Rowe Price and Pimco, according to data compiled by Bloomberg. 

Mr Hasenstab rose to prominence in the wake of the financial crisis thanks to big, bold investments in struggling countries like Hungary, Ireland and Nigeria, placing sometimes multibillion-dollar bets that they would turn their economies round. 

These unusually aggressive bets for a bond investor turned into money-spinners and catapulted the softly-spoken, cerebral fund manager into the upper echelons of the investment industry. Mr Hasenstab’s flagship fund, the Templeton Global Bond Fund, returned an eye-popping 16.2 per cent in 2012 and its assets under management rose to a peak of $73bn in 2014.

However, premature wagers that interest rates would creep higher and deflate the post-crisis bond market rally has also weighed on the fund’s performance. Assets under management for the Global Bond Fund have more than halved, and it has returned just 1.5 per cent over the past five years. 

Franklin Templeton suffered $11.7bn in outflows from its mutual funds in the first half of the year, extending an enduring pattern that sapped $44.6bn in assets last year, as investors favour low-cost index funds over its actively managed mutual funds.

The 66-year-old successor now sits unchallenged atop a $30bn entertainment empire

Three years ago, at a public event in New York, Les Moonves, the reigning king of television atop the most popular network in the US, said he did not want to combine his CBS with Viacom because he was “too old and too rich”.

At the time, CBS insiders and investors agreed. The reunification of the sister companies was viewed as the pesky preoccupation of Shari Redstone, scion of the powerful family dynasty who had just inherited control of the companies from her ailing father. Mr Moonves went so far as to sue her to block the deal — describing Ms Redstone in legal documents as an “interfering presence”.

The past year has seen a stunning reversal of fortunes. Less than six months after declaring war on Ms Redstone, Mr Moonves was out at CBS amid mounting allegations of sexual misconduct. At the same time, media megamergers left both CBS and Viacom looking vulnerable. Analysts suddenly viewed their reunion as logical, even necessary. 

This week’s $12bn deal to reunite the two companies has been the coup de grâce for Ms Redstone. After fighting off two of the most powerful men in Hollywood — Mr Moonves and her own father, with whom she has intermittently feuded over the years — Ms Redstone now sits unchallenged atop a $30bn entertainment empire. 

The 65-year-old Bostonian, who speaks with a thick New England accent and espouses a love for the region’s Patriots football team, has made for a compelling victor in the #MeToo era. The family business is no longer in the hands of her father, now aged 96, a patriarch whose sexual affairs were litigated in courtrooms and the pages of New York tabloids. 

Under his daughter’s watch, the boards of both CBS and Viacom are now majority female. CBS hired a “chief people officer” and installed human resources managers on all of its sets to “confidentially discuss any potential workplace situation”. CBS’s news division, plagued by sexual harassment allegations against senior executives Charlie Rose and Jeff Fager, has its first female president, Susan Zirinsky, and a star female host in Gayle King

The new combined company will bear Ms Redstone’s imprimatur as well. Loyalist Bob Bakish has been named chief executive of the group — not Joe Ianniello, a former Moonves lieutenant who ran CBS in his absence. Mr Bakish told the Financial Times last year that he has “known Shari for a long time,'' adding: “I’m not worried about my fate.”

Ms Redstone has not crowed about her victory; indeed, those close to her say she has been intentionally laying low. “She took it all very hard and experienced a lot of sexist stuff,” said one person close to her, adding that while she still wanted CBS and Viacom to merge, she “largely stayed out of” the negotiations.

Ms Redstone has been spending time with family and visits the Viacom office a few times a week, but is not involved in daily decision-making, people close to her added. 

Her ascent has been unusual for a woman in the media industry, the third generation of a family whose dysfunction and drama helped inspire some of the characters in HBO’s Succession. 

Growing up in the Boston suburbs, she watched her father take her grandfather’s small theatre chain and turn it into a global media powerhouse, inventing the multiplex cinema and expanding into television with a hostile takeover of Viacom — owner of MTV Networks and Nickelodeon — in the 1980s. 

As an adult, she trained in corporate law like her father, and was the only woman in an all-male criminal law firm. But after having children, she prioritised being a mother and wife, speaking of the virtues of staying home and baking cookies. “The one thing I was determined to do was never work in the family business,” she recently told a conference. 

She did not follow in her father’s footsteps in earnest until her 40s, after a divorce, becoming executive vice-president of National Amusements, once the Redstone movie theatre chain that has since become the family holding company. 

But in the boardroom, Ms Redstone was often belittled, with detractors saying she lacked the skills and experience to oversee a large public company. Her own father has been known to share those sentiments.

In a letter to Forbes magazine in 2007, Mr Redstone said his daughter had made “little or no contribution” to building the family-owned companies. In 2014, at age 91, he dismissed her prospects as the empire’s next chief, telling the Hollywood Reporter he would “not discuss succession . . . you know why? I’m not going to die.” 

While family succession has been commonplace in the media sector, it has almost always seen empires passed from father to son — the Newhouses of Condé Nast, the Sulzbergers of the New York Times Co, the Murdochs of News Corp and even Brian Roberts at Comcast. “There are certain presumptions about sons who take over jobs from their dad,” Ms Redstone said in June, noting how that was not the case when she took over from her father. 

Her testy relationship with Mr Redstone has thawed as his health deteriorated and he retreated from public view. In 2016, he was assessed by a doctor who told a Los Angeles court that he had difficulty recognising simple shapes and colours. The assessment came after his former girlfriend, Manuela Herzer, filed a legal petition challenging her removal as his primary carer. (“I wish he had made different decisions in his personal life,” Shari Redstone said of her father’s indiscretions.) 

But despite his speech difficulties, Mr Redstone was able to tell the court in videotaped testimony who he wanted to manage his healthcare: “Shari.”

Ms Redstone is still writing her own legacy, and has hinted at a vision greater than simply recombining Viacom and CBS. With Mr Moonves and Mr Redstone out of the picture, Ms Redstone has the challenge of steering the new ViacomCBS through a tumultuous period for the sector.

Her father had used his tax law training to mastermind acquisitions, with deals for Viacom, Paramount Pictures, CBS and Simon & Schuster during his reign. Ms Redstone said in June that “we would probably want to look at something after [the CBS-Viacom deal] and to develop scale and be transformative as we move forward”.

Analysts warn that merging CBS and Viacom may not be enough to convince investors she is the right person to lead the group in the battles ahead.

“Despite what Shari accomplishes near-term by getting these two companies back together, her family’s name will not be associated with excellence in shareholder returns,” warned Michael Nathanson, senior analyst at Moffett Nathanson, citing her father’s decision to separate the companies in the first place, and the lagging performance of Viacom stock in the past decade.

DAX:

MDAX:

SDAX:

Asian stocks climbed after the Trump administration de-escalated its trade war with China, providing some relief to under pressure risk assets. Still, softer than expected Chinese data kept sentiment in check with Treasuries edging higher and the yen clawing back some of Tuesday’s loss.

Stocks climbed across most of the region after the S&P 500 Index had its biggest intraday gain in more than two months. Washington said it was delaying until mid-December the 10% tariff on some Chinese-made products that are high on many holiday-shopping lists such as phones, laptops and toys. China said it was sticking to September trade talks with the U.S. The offshore yuan slipped along with the Australian dollar as Chinese retail sales and industrial output data missed estimates.

US After Hours REAL +12%, GO +11%, MYGN -16.5%, ADPT -10.2%, CDK -9%, TLRY -8.5% among notable earnings/guidance movers

NKY +0.99% Hang Seng +0.58% CSI +0.69% Shanghai +0.64% Shenzen +1.01%

Eur$ 1.1170 CNH 7.0347 CNY 7.0187 JPY 106.40 GBP 1.2059 CHF 0.9759 RUB 65.0036 TRY 5.5794 WTI$ 56.48 -1.09%

S&P -0.10% EuroStoxx +0.03% FTSE +0.32% Dax -0.01% SMI +0.32%

Macro :

- China Sticking to September U.S. Trade Talks After Tariff Delay

- Morgan Stanley Says to Keep Pricing In Trade-War Escalation

- Buying the U.S. Stock Dip Looks Like a Losing Proposition to UBS

Keep an eye on :

- ADL GY : Adler Real Estate First Half Ebit EU214.0 Mln

- ADO GY : ADO Properties Maintains Full Year FFO I About EU65 Mln

- AMS SW : AMS Takeover of Osram Is Not Too Big for Company, CEO Tells FuW

- ASCN SW : Ascom Initiates Evaluation of Strategic Options, Dumps ’19 Goals

- SPR GY : Axel Springer 1H Adj. Ebitda Down 2.7% to EU344.8 Mln

- BARC LN : Barclays No Longer Working With Coinbase, Coindesk says

- B5A GY : Bauer First Half Ebit EU35.3 Mln

- BELL SW : Bell Reports 1H Loss; Aims to Increase Prices in 2H

- GBF GY : Bilfinger 2Q Adj Ebita Rises 47%, Forecast Confirmed

- CHAM SW : Cham Group to Delist From Zurich’s SIX to Trade Off Exchange

- EVT GY : Evotec Raises FY Guidance; 1H Adj. Ebitda Up 51%

- GSC1 GY : Gesco 1Q Net Down 34%; Sees FY Net at Lower End of Guidance

- HHFA GY : Hamburger Hafen 1H EBIT EU114.3M; Confirms 2019 Forecast

- HEIJM NA : Heijmans Wins 10-Year Maintenance Contract From Liander

- HEX NO : Hexagon Composites Second Quarter Ebitda Misses Lowest Estimate

- HIAG SW : HIAG Stops Development of Multicloud Platform

- LEO GY : Leoni Second Quarter Ebit Loss Wider Than Estimates

- LUN DC : Lundbeck Second Quarter Ebit Misses Lowest Estimate

- NNIT DC : NNIT Second Quarter Revenue Misses Lowest Estimate

- NDX1 GY : Nordex Maintains Full Year Ebitda Margin 3% To 5%

- NOFI NO : Norwegian Finans Holding 2Q Net Income 1.9% Above Est.

- RYA ID : Ryanair’s Irish Pilot Union to Enter Mediation on Dispute

- SCHP SW : Schindler Maintains Full Year Revenue +4% To +6%

- SEM AV : Semperit First Half Ebitda EU39.1 Mln

- SAE GY : Shop Apotheke 1H Adj Ebitda Loss Widens to EU9.6m; Confirms View

- SIP BB : Sipef NV First Half Loss Per Share 50c Vs. EPS $2.37 Y/y

- SPD LN : Sports Direct Seeks U.K. Help As It May Fail to Hire Auditor: FT

- SNH GY : Steinhoff International Says SEAG, SFHG Completed Restructuring

- STMN SW : Straumann Raises FY Guidance; 1H Rev. +16% Meeting Estimates

- VZN SW : VZ Holding First Half Operating Revenue CHF148.8 Mln

- ZO1 GY : Zooplus First Half Ebitda EU4.5 Mln

* CompuGroup Upgraded to Hold at Baader Helvea; PT 52 Euros

* Europcar Upgraded to Buy at HSBC; PT 6.40 Euros

* Ferrari Upgraded to Buy at Goldman; PT $182

* Grupo Financiero Galicia ADRs Raised to Neutral at JPMorgan

* Tod’s PT Cut at Jefferies on Inability to Attract New Customers

* New Work Raised to Hold Following Strong Sell-Off: Berenberg

* Unicaja a Buy on Capital Returns, Liberbank Hold, Jefferies Says

London-based asset manager has been one of the biggest lenders to the German entrepreneur

Financing from H2O Asset Management helped Lars Windhorst settle a lawsuit from a vehicle linked to the former energy minister of Russian president Vladimir Putin.

H2O’s ties to Mr Windhorst hurt the London-based fund manager in June when the Financial Times revealed the scale of its funds’ exposure to illiquid bonds linked to the controversial German entrepreneur.

For Mr Windhorst, the backing of H2O, a subsidiary of French bank Natixis, proved useful at the end of 2017 when he was embroiled in a €66m lawsuit that had frozen his assets, including those held at Swiss private bank Julius Baer, expensive wines and a private jet.

In the lawsuit, Romanello, a Belize-registered investment vehicle, sued Mr Windhorst in London, claiming that he had failed to honour a series of trades of “illiquid” bonds and stocks.

Five people familiar with the matter told the FT that Romanello was linked to Igor Yusufov, who was energy minister during Mr Putin’s first term as Russian president.

Romanello had pursued its claim against Mr Windhorst in a particularly forthright manner. With the help of heavyweight litigation specialist Quinn Emanuel, Romanello achieved a worldwide freeze of Mr Windhorst’s assets,

In December 2017, Mr Windhorst, whose businesses include luxury lingerie maker La Perla and a stake in German football club Hertha BSC Berlin, settled the lawsuit with Romanello. The settlement terms were confidential.

In the run-up to the settlement, Mr Windhorst’s business empire had been propped up by a series of rescue financing deals where H2O played a significant role. These included Mr Windhorst raising €500m through a bond from an entity called Chain Finance in August 2017. H2O bought nearly half of the bonds by the end of that year.

The bond issued by Chain Finance helped Mr Windhorst to settle the disputed financing agreements at the heart of the litigation he was facing. An accompanying document explained it would be used to purchase bonds, equity instruments, structured notes and pooled investment vehicles, as well as allowing Chain Finance to grant “unsecured loans to individuals and companies”.

After settling the lawsuit with Romanello, Mr Windhorst also signed a deal to potentially pursue investments with the vehicle, according to people familiar with the negotiations.

In its lawsuit, Romanello said that the deals were arranged between Mr Windhorst and a Switzerland-based middleman acting for the investment vehicle.

Romenello said the arrangement was that it would buy the assets from Abu Dhabi-based brokerage ADS Securities on the promise that ADS would buy them back before a set date at a pre-arranged price. Mr Windhorst later agreed to buy back the bonds himself, according to the lawsuit.

ADS handled several transactions for the German financier and built up substantial exposure to him in 2016.

A spokesman for Mr Yusufov did not provide a response for publication. Spokespeople for Mr Windhorst, H2O and ADS Securities declined to comment.

The people familiar with the matter said that the investment vehicle was connected to Mr Yusufov, who previously served on the board of Russia’s state-owned energy company Gazprom. A lawyer who has acted for the Yusufov family signed the co-operation agreement with Mr Windhorst, seen by the FT, which laid out plans to invest together in the “oil & gas and energy sector in Russia, CIS and Europe”.

Mr Yusufov already has several oil and gas investments on the Yamal peninsula in northern Russia through his primary investment company Corporation Energy.

His son, Vitaly, previously headed the Moscow branch of Nord Stream, an international consortium that built a natural gas pipeline from Russia to Germany. Nord Stream’s chief executive Matthias Warnig, an ex-Stasi officer and close friend of Mr Putin, is an acquaintance of Mr Windhorst who previously spoke at a dinner he hosted.

Russia was a familiar hunting ground for the serial dealmaker Mr Windhorst, who once rented an office two floors above Mr Warnig’s in a business centre across the street from the Kremlin. Artem Volynets, the former lieutenant of aluminium magnate Oleg Deripaska, represented Mr Windhorst’s interests in Russia from 2014.

Mr Volynets fronted an attempt by Sapinda, Mr Windhorst’s investment company, to renegotiate a debt restructuring at Petropavlovsk the following year, after building a significant stake in the Russian gold miner.

Mr Volynets was a director of Luxembourg-registered Sapinda Eurasia, along with Claus Nouveau-Nikolajsen, a now deceased executive of ADS Securities. Mr Nouveau-Nikolajsen was also named in Romanello’s lawsuit, which said the Danish executive was involved in the initial agreement to buy back the Windhorst-linked bonds.