A trade that netted hedge fund Promeritum Investment Management returns of over 30% has run its course, according to its co-founder, who is switching out of distressed emerging-market dollar bonds after a two-year run and moving into local-currency EM debt.
The move by Promeritum comes after wagers on defaulted bonds from the likes of Sri Lanka, Ghana and Ukraine earned it returns of roughly 16% in each of the previous two years, surpassing gains made by a Bloomberg index of EM debt hedge funds over this period. The trade also helped extend the fund’s track record of notching gains every year since its 2015 inception, while its 9% annualized return since then is triple what the EM dollar debt index has achieved.