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This big-name fund manager lost $1.8 billion during Argentina's massive market rout

Aug 14, 2019, 17:24 IST

Argentina's President Macri listens as World Bank President Jim Yong Kim speak during a news conference at the Olivos Presidential Residence in Buenos AiresThomson Reuters

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  • A big-name fund manager lost almost $1.8 billion on Monday after Argentina's financial markets suffered a historic collapse, according to the Financial Times.
  • Michael Hasenstab stomached losses across six funds after Argentina's currency, stock market, and bond prices plunged following president Mauricio Macri's shock primary loss.
  • Hasenstab made his name by placing large, lucrative bets on ailing economies rebounding from the financial crisis.
  • View Markets Insider's homepage for more stories.

A big-name fund manager lost almost $1.8 billion on Monday after Argentina's financial markets suffered a historic collapse, according to the Financial Times.

Michael Hasenstab, who invests clients' money for California-based Franklin Templeton, stomached the hefty losses after Argentina's president, Mauricio Macri, was trounced in primary elections by left-wing rival Alberto Fernández.

Investors responded to the shock result by dumping the South American country's assets, fearing a more protectionist regime could take control after the presidential election in October. The exodus almost halved the total market cap of Argentina's Merval index - the second-largest single-day drop for any stock market since 1950.

The Argentine peso also plunged, and the price of Argentina's 8.75% government bond tumbled 38%, from 73 cents on the dollar to 45 cents, according to the Wall Street Journal.

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Hasenstab made his name by placing large, lucrative bets on Ireland, Nigeria, and other ailing economies rebounding from the financial crisis. He bought massive amounts of Argentine debt in anticipation of a similar turnaround. However, his funds' exposure to the country meant they suffered sharp declines in value.

For example, the Templeton Emerging Markets Bond Fund slumped 3.5% on Monday, slashing the value of its portfolio by $400 million. Five other Hasenstab-managed funds posted similar declines, resulting in combined losses of nearly $1.8 billion, the FT calculated using fund data from the end of July.

Franklin Templeton didn't immediately respond to a request for comment from Markets Insider.

Other large holders of Argentine debt - including Blackrock, T Rowe Price, and Pimco - were likely caught in the fallout too, the FT said.

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