The gift that keeps giving is back: Argentine GDP warrants

Richard Deitz’ VR Global Fund is up 21% year-to-date, half of which has come from holdings in Argentina. With the strong outcome in favor of Mauricio Macri’s Podemos party in October’s midterm election, the manager believes there remains significant upside to his positions in the country. Macri obtained the broad support despite two tough years for the Argentine population with necessary adjustment measures sending the country into a recession and keeping wage growth below inflation, reducing purchasing power.

The people of Argentina approved of these policies as a necessity for a better day which indeed seems to be upon them. Economic growth in recent months has picked up markedly and Macri’s chances for re-election in two years are excellent. It allows the investor community to return to the country supporting strong growth in the coming years. This bodes well for an instrument that has historically been a great investment for VR, the somewhat opaque Argentine GDP warrants. With growth in 2017 likely to exceed the 3% level that triggers payment on the warrants, and with the almost certainty that in 2018 growth will accelerate to well above the 3% the warrants once again look highly interesting.