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Brazil: Andrew Feltus calls buying bonds of Cia. de Bebidas das Americas, Latin America's largest brewer, the “all-time best investment I've made'', Bloomberg revealed on October 14. The Brazilian beer company, known as AmBev, has generated a total return of more than 40 % in less than two years.
“That company has made more money for our investors than any other,'' Feltus, 35, whose Pioneer Global High Yield Fund ranks second in its peer group this year, said in an interview at his office at Pioneer Investment Management Inc. in Boston.
Feltus said he was drawn to Sao Paulo-based AmBev because of its two-thirds market share positions in Brazil and Argentina, South America's biggest economies, and a management team led by Chief Executive Officer Carlos Brito. Belgium's Interbrew SA is buying AmBev to become the world's second-biggest brewer after Anheuser-Busch Cos. of St. Louis.
Feltus acquired AmBev bonds when they were trading as low as 74 cents on the dollar and had a yield of more than 16 percent. ``For a high-yield investor, that's nirvana,'' Feltus said.
AmBev probably will be raised to investment-grade status by credit-rating companies, Feltus said. He's sold virtually all of the bonds because they have “pretty much run their course'' and other Brazilian issuers offer higher yields.
The MainStay fund has about four-fifths of its assets in debt sold by so-called developing nations. Feltus's fund had 53 % of its assets in U.S.-based bonds at the end of September; 17 % in developed nations in Europe and Asia; and 30 % in emerging markets such as Russia and Brazil. The developing-country bonds include both corporate and government-issued securities. Bonds of lower-rated borrowers pay higher yields to compensate investors for the increased risk that they won't pay their debts. This year U.S. junk bonds returned 6.8 percent to investors, compared with 4.3 percent for investment-grade corporate debt and the 3.2 percent gain of Merrill Lynch & Co.'s U.S. Treasury and agency bond index. The Standard & Poor's 500 stock index is up 1.5 percent, including reinvested dividends.
Feltus, who graduated from Tufts University outside Boston and joined Pioneer a decade ago, makes investment decisions based on what he views as the countries and currencies with the most promise. He selects what to buy after a review with a team of credit analysts led by Michael Temple, 44.
Feltus plans to reduce his holdings to 50 to 70 securities from 100. “Every high-yield company has something wrong,'' he said. “There's a reason they get a high yield. It could be a bad business, it could be a bad balance sheet.'' Some suffer from a “zip-code problem,'' meaning they're healthy companies that are valued at less than what they're worth because they're located in countries with political or economic problems, he said.
Emerging-market debt adds “spice in the form of higher- yielding securities to offset the stability of U.S. debt securities,'' said Brad Durham, managing director of Emerging Portfolio.com Fund Research in Cambridge, Massachusetts.
15 October, 2004
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