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'Famous' Bond Investor Turns Out To Be Nothing More Than A Glorified BTFDer

Tyler Durden's picture




 

"Michael Hasenstab is all about the big trade," is the 'masters-of-the-universe'-esque introduction by Bloomberg for Franklin Templeton's "famous" bond fund manager. “His success speaks for itself, but he does take bets,” notes one financial planner but it appears Hasenstab has BTFD one time too many - after loading up on more than $7 billion of Ukraine's bonds (equal to almost half of all Ukraine’s foreign bonds) he has seen them almost cut in half to around $4 billion. And it appears clients are seeing the bond guru's BTFD-iness for what it is - extreme risk with OPM - as investors last year pulled a record $14 billion from the U.S. and European versions of the Templeton Global Bond Fund.

As Bloomberg reports,

After loading up on more than $7 billion of the country’s bonds, Hasenstab has seen the value of the securities collapse as the conflict with pro-Russian rebels deepened an economic recession, depleted foreign reserves and prompted government calls for a debt restructuring. His investment, equal to almost half of all Ukraine’s foreign bonds, is now valued at just $4 billion, based on fund holdings from the end of the third and fourth quarters.

 

As the losses mount, returns on Hasenstab’s two biggest funds -- standouts in the industry that have outperformed 99 percent of peers over the past decade -- have slipped, helping fuel client redemptions. Investors last year pulled a record $14 billion from the U.S. and European versions of the Templeton Global Bond Fund.

 

...

 

“Franklin Templeton’s Global Bond group often takes a contrarian approach to investing,” Coleman said in an e-mailed response to questions. “It has the research capabilities, size and long-term perspective to buy and hold investments that are out of favor.”

 

The Ukraine trade started to unravel in the second half of last year as the government’s finances deteriorated.

It seems Hasenstab is nothing more than a well-paid knife-catcher?

He’s also made big investments in debt from South Korea, Hungary and Poland, Bloomberg data show. Hungary’s dollar bonds have returned an average 54 percent over the past three years, helping Hasenstab’s Global Bond Fund return an average 10.1 percent annually over the past decade.

 

The fund’s return, though, slipped to 1.99 percent last year, a figure that put Hasenstab behind 53 percent of his peers. The Ukrainian bonds were responsible for more of that slump in returns than those from any other country, according to data compiled by Bloomberg.

 

“The fund’s management team is nothing short of brilliant,” Gilbert Armour, a financial adviser in San Diego who owns the fund for clients, wrote in an e-mail. “I wouldn’t let a short-term dip in performance deter one from sticking with a long-term winner.”

But now - as holder of more than half of Ukraine's foreign debt, Hasenstab now finds himself in the position of having to decide how much, if anything, he’s willing to give up in restructuring negotiations.

The government has hired Lazard to advise it in talks with bondholders, Reuters reported Wednesday, citing people familiar with the situation.

 

Restructuring talks will likely have the support of the IMF, according to Lutz Roehmeyer, a fund manager who oversees $1.1 billion in emerging-market debt at Landesbank Berlin Investment GmbH. If IMF officials are showing a willingness to extend the terms of their financing to Ukraine, they will be looking for bondholders to make concessions too, he said.

 

“Nobody wants to fund Ukraine alone,” Roehmeyer, whose holdings include Ukrainian debt, said in a Jan. 22 telephone interview. “Not the U.S., not the EU and not the IMF. It’s a piecemeal approach, and of course creditors will have to contribute. If the IMF prolongs its loans, it will demand the same from bondholders.”

*  *  *

We have a simple question - what were the 'fundamentals' that Hasenstab was seeing to BTFD in this?

“It’s a country that despite some of the short-term fiscal issues has very little indebtedness,” Hasenstab, 41, said in the April 5 piece. “So from a bondholder investor standpoint, it made a lot of sense. Then the crisis came, and what encouraged us was the response of crisis management.”

 

Two months later, Hasenstab was quoted in a Morningstar Inc. interview as saying that Franklin Templeton had made “a good amount of money” as Ukrainian bonds rallied. The selloff would start a few weeks later.

 

 

 

 

The math at this point isn’t encouraging: Ukraine has to make $14 billion of foreign bond payments over the next three years, an amount that’s almost double the $7.5 billion of international reserves it has left, according to data compiled by Bloomberg.

 

And the economy is in tatters. Government officials are predicting a 4.3 percent contraction this year following a 7.5 percent drop last year. The military conflict with separatists, which has claimed more than 5,000 lives since it began in April, has snarled business in much of the east of the country.

*  *  *

Or is it yet another falling knife to catch - if it drops - oh well it's OPM... if it soars - hero bond manager knows all... Incentives anyone?

 

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Sun, 02/01/2015 - 21:09 | 5733130 Max Cynical
Max Cynical's picture

$7B of Ukraine bonds...seriously, WTF? He should have just gone to Vegas.

Sun, 02/01/2015 - 21:18 | 5733148 knukles
knukles's picture

His name was Michael Hasenstab

Sun, 02/01/2015 - 21:57 | 5733207 theNarrator
theNarrator's picture

.

Sun, 02/01/2015 - 21:58 | 5733208 29.5 hours
29.5 hours's picture

 

 

He bought half of Ukraine's bonds. This makes him a patriot, right?

 

 

 

Sun, 02/01/2015 - 21:08 | 5733133 fed_depression
fed_depression's picture

Just wait till the rest of these BTFDpers get flushed out for knowing absolutly zero about markets long term; including the banksters.

Sun, 02/01/2015 - 21:12 | 5733141 buzzsaw99
buzzsaw99's picture

no problem. the imf exists solely for the benefit of guys like hasenstab. don't worry dude, your 2 and 20 and your new bigger yacht aren't in any danger.

Sun, 02/01/2015 - 21:12 | 5733143 Flying Spaghett...
Flying Spaghetti Monster's picture

he was simply touched by my noodly appendage, all is well,

R'Amen

Sun, 02/01/2015 - 21:14 | 5733144 YouSerious
YouSerious's picture

Why would you bet on a maniac like putin backing down? he is all about the ego now

Sun, 02/01/2015 - 22:01 | 5733219 29.5 hours
29.5 hours's picture

 

 

Ukraine, Crimea, Black Sea...no this is not about ego. This is serious geo-political big stakes.

 

 

Mon, 02/02/2015 - 00:53 | 5733733 sun tzu
sun tzu's picture

He bet on US-backed Neo-Nazis that overthrew the elected government of Ukraine. He should have learned paid attention in history class. The Russians whooped the Nazis in WWII. That's what he gets. LMAO!!!

Mon, 02/02/2015 - 07:16 | 5734144 SoDamnMad
SoDamnMad's picture

sun tzu

The Russian winter whipped the Nazi push.  The Russians took horrible losses; both civilian and military.  While we (this to appease all the Russian trolls) didn't win the war by pushing north through Italy and landing at Normandy, we did force the Germans to divide their forces and relieve the pressure on Russia.  If it had not been the coldest winter in decades Moscow might have been leveled.  If you haven't lived in -40 degree weather you ain't shit.

Mon, 02/02/2015 - 07:31 | 5734157 IronLead
IronLead's picture

According to russian informations, Russia lost 27 million people.

 

What was the german russian kill ratio? 

 

The war was ugly for Russia, despite receiving 500000 military vehicles from Roosevelt, and fighting against a Germany that fought a two front war, nothing like the shiny stalinist parade they have once a year.

 

 

Sun, 02/01/2015 - 21:26 | 5733155 SillySalesmanQu...
SillySalesmanQuestion's picture

"No one's buying Mortimer...they're all selling."

Sun, 02/01/2015 - 21:46 | 5733189 Rathmullan
Rathmullan's picture

My guess is that he was listening to either vpotus' son or the smartest guy that vpotus knows - or both.

Sun, 02/01/2015 - 22:01 | 5733214 Robinhood
Robinhood's picture

Let  me guess? he's fucking victoria nudelman.

Mon, 02/02/2015 - 01:02 | 5733765 Flying Spaghett...
Flying Spaghetti Monster's picture

I am the ONLY "noodle man", I am the way, the light, and the starch -- the complex carbohydrate that keeps this whole thing together!

Sun, 02/01/2015 - 22:28 | 5733281 pragmatic hobo
pragmatic hobo's picture

if you don;t buy the fucking dip what would you buy?

Mon, 02/02/2015 - 02:20 | 5733870 roddy6667
roddy6667's picture

Why do you have this need to buy?

Sun, 02/01/2015 - 23:11 | 5733387 Sziget
Sziget's picture

Hungary’s dollar bonds have returned an average 54 percent over the past three years, helping Hasenstab’s Global Bond Fund return an average 10.1 percent annually over the past decade.

Oh. Nice to know my tax forints going to a good place, helping out someone in need. Especially the 27% VAT on food.

Sun, 02/01/2015 - 23:20 | 5733395 RaceToTheBottom
RaceToTheBottom's picture

I guess Templeton does not get the US political to WS memos....

They made the mistake of being seen as a non US TBTF firm...  Sorry Charlie, you didn't think that you were in a meritocracy, did you?

 

Sun, 02/01/2015 - 23:39 | 5733486 Said In CONTEXT
Said In CONTEXT's picture

  "fukin' guys' got more wood than Ron Jeremy." --Gordon Gecko

---After reading the article, the quote just sorta popped into my head, funny how

stuff like that happens,but to tell the truth,I really don't know if it applies to

this or not..

 

Mon, 02/02/2015 - 00:30 | 5733670 Niall Of The Ni...
Niall Of The Nine Hostages's picture

In other words, this clown bet big on Kiev's debt expecting the Ukrainian fascists to defeat Russia in a war on the European front  (or for the Americans to do it for them), when anybody who had ever read a history book could have told him that even before the atomic age nobody had ever succeeded in doing so, and that nobody in his right mind should buy the debt of a country with a government dumb enough to try with money he couldn't afford to lose.

I've come to expect banksters to be monsters. I don't expect them to be fucking morons.

Mon, 02/02/2015 - 02:31 | 5733882 Omen IV
Omen IV's picture

Soros protege - thought he would be accepted into the club

Mon, 02/02/2015 - 01:48 | 5733827 Muppet
Muppet's picture

I'll assume the IMF or US FED will make-whole on the bonds.  

Mon, 02/02/2015 - 03:10 | 5733930 Sizzurp
Sizzurp's picture

This reminds me of the Bear Sterns MBS fund fiasco.  Their 2 big MBS funds were labled dumb and dumber, with dumber being the more hyperleveraged variety.  They ended up bringing down the entire company.  They sold out to JPM  for $10/share.  The stock had traded at $133 before the crisis. Some of these so called safe sovereign bond funds are going to have some "come to Jesus" moments as sovereign defaults start cranking up in the months ahead. 

Mon, 02/02/2015 - 03:58 | 5733980 WTFUD
WTFUD's picture

The UKRAINIAN STOCK EXCHANGE

The Last Bastion of CAPITALISM here on earth.

Turn those machines back on!
Turn those machines back on.

Mon, 02/02/2015 - 06:27 | 5734106 writingsonthewall
writingsonthewall's picture

“The fund’s management team is nothing short of brilliant,” Gilbert Armour, a financial adviser in San Diego who owns the fund for clients, wrote in an e-mail. “I wouldn’t let a short-term dip in performance deter one from sticking with a long-term winner.”

Long term? waht long term? Do you mean AFTER Russia siezes Ukraines assets and all the bond holders get 100% haircuts?

 

It's a paragraph that sums up these times, keep investing because everything always go up in value!

The world of 'professional investors' is filled with clowns who are detached from reality, I'm sure the history of Ukranian bonds says something different, but then history is being made daily - not a sign of future success.

 

War is going to undo all Bond managers long held 'beliefs'

Mon, 02/02/2015 - 21:19 | 5737246 pashley1411
pashley1411's picture

sovereign debt from a country split by civil war, dam.   And we joke about looking for yield in all the wrong places.  Why doesn't he just reallly go hard-core and pick up old Confederate States debt? 

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