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Billionaire Fund Manager Bill Gross Bets Big on Mexico

08 September, 2016

Billionaire bond fund manager Bill Gross of the Janus Capital Group is buying into Mexico in a big way. According to the fund’s website, Gross’s $1.5 billion Janus Global Unconstrained Bond Fund counts Mexico’s inflation-linked notes – scheduled to mature in 2025 – among its top five holdings as of June 30,2016 reported Bloomberg.

“He’s seeking to profit from Mexican debt that’s buoyed by rising consumer prices as the peso plunges.” 

A decline in the Mexican peso this year has helped push the inflation rate to 2.72 percent up from a nearly 50-year low in December of 2.13. This pickup has investors like Gross scrambling to invest in the Mexico notes. 

“Considering the probability that the one-off’s that lowered inflation would not happen again, it was a good trade,” shared Andres Jaime, who is a strategist at Barclays, with Bloomberg.

According to the report, the Mexican notes are equal to more than four percent of the holdings in Gross’s bond fund, making it his largest government bond holding as of June 30. The fund has already returned 3.7 percent so far in 2016, outperforming 61 percent of its peers, and posting a total return of 2.8 percent since Gross took over in October 2014. 

“Gross started talking up Mexico in June 2012, when he said he favored the nation’s bonds over German securities citing the Latin American nation’s higher yields and lower debt levels,” Bloomberg wrote. “Last year, he said Mexico offered the ‘most attractive yields in the world.’”

In addition,Mexico’s break-even rate – which is a bond market gauge of cost of living expectations – has risen to 3.25 percent – up from just 2.8 percent in April 2016. And Bill Gross isn’t the only big-time fund manager to bet that Mexico will continue to be an attractive investment opportunity. 

“Inflation is not projected to be as low and benign as it was late in 2015,” shared Alberto Ramos chief economist in Latin America from Goldman Sachs Group.  

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Topics: Economy Investment